Forced to sell my oil ETF in my 401K.

[Madison320]

Fidelity is forcing me to sell my oil ETF in my 401K. It sucks being forced to sell something when it's down and you know it's going back up. The reason given is that it generates UBTI (Unrelated Business Taxable Income). Anyone ever heard of this? It seems like they could do this with any investment ... except for US treasuries of course.

 

[angelatc]

https://www.biggerpockets.com/blogs/2810/blog_posts/26786-what-is-ubti

 

[Madison320]

https://www.biggerpockets.com/blogs/2810/blog_posts/26786-what-is-ubti

By that definition UBIT could be anything. I haven't really started checking into this. I'm wondering if the other popular oil ETF has this problem.

 

[presence]

what does "forcing me" mean?

 

[Madison320]

what does "forcing me" mean?

It means I have until November something to sell it otherwise Fidelity will do it for me.

 

[Zippyjuan]

If you are in a company 401k you are limited to the options they offer. When they reduce their offerings, you either have to change to another one they have or cash out and pay a big penalty.

 

[helmuth_hubener]

Fidelity is forcing me to sell my oil ETF in my 401K. It sucks being forced to sell something when it's down and you know it's going back up. The reason given is that it generates UBTI (Unrelated Business Taxable Income). Anyone ever heard of this? It seems like they could do this with any investment ... except for US treasuries of course.

Do you work for a non-profit, Madison? And is the 401k through them?

 

[Brian4Liberty]

If you have to sell but you like the investment, you can just sell and buy something similar with the proceeds.

 

[cocrehamster]

It has to do with the structure of limited partnerships,which are in the ETF, and their tax treatment. They are treated much differently than other securities and you could owe taxes even owning it in a tax sheltered account.

 

[cocrehamster]

https://www.irs.gov/pub/irs-tege/eotopicl00.pdf