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Are YieldCo's suitable for IRA accounts?

Reading quite a bit about the new YieldCo's that generate income from alternative energy assets. There is a big IPO coming out for 8point3 Energy this Friday, which is a spin-off from First Solar and SunPower. Most YieldCo's appear to be structured as Master Limited Partnerships (MLPs). Would this create a problem with IRA accounts?

Jun 17, 2015 by James in  |  Flag
4 Answers  |  5 Followers
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2 votes
Michael Baker Level 7

James,

One consideration is Unrelated Business Tax Income (UBTI) When you hold an MLP in the IRA, you will still have to pay taxes (out of the IRA) on any income that is passed through to partners in excess of $1,000/year.

There are various views on this because the income can justify those taxes, however, some of the tax benefits of owning an MLP can't be realized when it's held in an IRA.

No question that there is a speculative nature to this, but if you're ok taking that gamble I'd recommend talking to an advisor that can explain in more detail the positives and negatives of holding such investment vehicles in your IRA.

Cheers!

Comment   |  Flag   |  Jun 17, 2015

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This is pure speculation and does not belong in any retirement account. That said you could find a custodian to hold MLPs. Again trying to beat the market is speculating and gambling. This type of activity belongs in Las Vegas not your retirement account.

Comment   |  Flag   |  Jun 17, 2015 from Green Bay, WI

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Steve Casull Level 13

James, what have you noticed that has happened to IPOs recently? I've been doing this for a long time. Back in the day, IPOs were priced from a 'marketing standpoint". The underwriters were guaranteeing all the share to be bought, so they left some "meat on the bone" for the buyers of the IPO stock. These were the days that you were almost assured of making a gain if you got "in on the ipo". Well those days are over. Underwriters have realized they have left money on the table. Well I say, give up on going after IPOs unless you see credence in the dynamics of the investment. MLPs are income related. Why do you need an income related investment in an IRA? Especially when that investment could dispell the dynamics of the IRA?

Comment   |  Flag   |  Jun 17, 2015 from South Jordan, UT

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Richard P Taylor Level 17

James, I would agree with all of the previous responses to your question. Generally speaking, yes, they do create a problem inside of an IRA. I would stay away from that. Also, it sounds a lot like you are being very speculative. For investors who use this, it usually works until it doesn't. I would highly suggest not going the this route. Find yourself a quality portfolio that will give you some growth over time. Good luck.

Comment   |  Flag   |  Jun 19, 2015

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