Unrelated Business Taxable Income and Your IRA
If your IRA owns an asset that produces unrelated business taxable income, your IRA may be subject to taxation under section 512 of the IRC. Generally, investments that can generate UBTI include limited partnerships, limited liability companies, and any investment that incurs debt financing and/or is involved in an unrelated business.
In most cases, IRAs which receive more than the current $1,000 UBTI exclusion must file Form 990T with the Internal Revenue Service on or before the April 15th deadline. Form 990T payments must be made from retirement fund assets, and direction to pay these taxes must be received by Equity Trust at least 10 days prior to the due date (plus any extensions).
Assets that generate less than $1,000 of UBTI are not required to file Form 990T.
In most instances, UBTI is reported on the Schedule K-1 which is prepared by the investment sponsor. Clients should arrange to receive a duplicate copy of any material sent by an investment sponsor to Equity Trust Co.
Any gains or losses that are reflected on the Schedule K-1 should not be commingled with your personal tax returns. Schedule K-1s issued to IRA account holders must contain the Equity Trust Co. Tax ID number, not your personal social security number.
For further information please consult with a certified tax professional.