Being an appraiser, my investment portfolio is heavily weighted to REITS. I just set up Roth IRA's for both my wife and myself. Somewhere I encounter some kind of a reference to certain types of income that have limitations on inclusion in IRA's. My first queston is are Reits, MLP's, and ??? problematic if included in a Roth?

My second question is more general. If you have general brokerage accounts, thaditional IRA's and Roth's, where do things like short term [5-30 day] trades, long term holdings, options, Reits and MLP's best fit.

These may be simple questons, but my mind is bogged down in the micro analysis. As background, my wife and I am mid 50's and 10 year from retirement. By background basically management in banking, real estate development/theater operations, construction and now government appraisal & tax administration.

thank you in advance........littleboymaker

Sorry, no words of wisdom on income limitations for REITs, MLPs, and ???


I'll get you started here at least. There are no clear rules about what assets work best in what account types. If you have an investment that throws off taxable interest or dividends, that'd be a good reason to put it in a traditional or Roth. But also your highest risk/highest expected return stuff is best put in a tax shelter. Any lower-risk stuff that doesn't generate taxable gains and is being held long-term probably makes the most sense in a taxable account.

There is no one best answer to your question.

Lets take short term trades. If you want to use margin, you are talking about a standard brokerage account. But, a short term trade that works in your Roth has no tax implication, nor bookkeeping and reporting issues which are advantages. Remember that any "trades" that lose money can offset gains if they are done in a taxable brokerage account - but you can not do this if they are done in a Roth or IRA.

So.... if you have a great short term idea that has a very high probability of success and does not require margin - use your Roth.

Options: You will find that custodians often restrict or even prohibit the use of options in a Roth or IRA. Covered calls are likely to be allowed because there is no unlimited libability. Naked options are generally not allowed by custodians.

You can own REIT stocks in IRA or Roths.... like CARS (a REIT that owns auto dealership properties). Private real estate placements (partnerships, LLCs, etc) present more issues of unrelated business income, depreciation, etc. and are more likely suitable for your taxable accounts. Perhaps others can flesh this out further.

Long term holdings: IF (and given the deficits and Congresses problems with the budget it is a big IF) long term capital gains stay low, the IRA (which gets taxed as ordinary income) looks weaker and the advantage of the Roth narrows.

You asked a very big question. I only attempt to give you some viewpoints.