Thursday, April 7, 2011

A (x?*&!) Royalty Trust what?

Q.  Honey, according to my broker, I have 5 ***Royalty Trust reports to include in my tax return.  I downloaded just one and it took me 15 minutes to find. Then, after reading through the 36 pages, I haven't a clue as to what I am supposed to do. When I called my broker, he told me to take it to my income tax advisor. I don't have an income tax advisor as I've always prepared my own taxes. Now what do I do? I still have 4 more to go!  MG, Indiana

A.  These trust types of income reporting are a real pain in the you-know-where. I had to do the same today and pro-rate the darn thing for the 4 days my client owned it in 2010.

Perhaps it's time to find a tax advisor-preparer who can help you with these. The issues are quite complex. The broker in question had my client in this "investment" for less than 60 days. It makes me upset to think he bought something in Nov. 2009 and sold it in Jan. 2010. If this investment was so wonderful, why sell unless you want to generate fees?

I advise my clients not to own any investment they can't explain to a 12 year old in less than 5 minutes. If you don't know what you own and what the income tax ramifications are, why own it? Perhaps you should find a new broker along with a tax advisor.

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