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UBIT (Unrelated Business Income Tax)

What is UBIT? When does it occur? And how can I remain compliant?

If your IRA owns an asset or interest that produces unrelated business taxable income (UBTI), your IRA may be subject to an unrelated business income tax (UBIT) pursuant to Section 511 of the Internal Revenue Code.

FREE Self-Directed IRA Rules Guide

Is My IRA Responsible for UBIT?

Unrelated business income tax applies if ALL of the following are true:

  • Income is derived from “trade or business” activity (i.e., sale of goods and services).
  • Business activity is not substantially related to exempt status.
  • Business is regularly carried on by organization.

Generally, IRA investments that can generate unrelated business income tax include:

  • Limited Partnerships (LPs)
  • Limited Liability Companies (LLCs)
  • Any investment that incurs debt financing and/or is involved in an unrelated business

What is UBIT? How does it affect my IRA investments?

Watch this short video to discover:

  • When UBIT occurs
  • How unrelated debt financed income (UDFI) is calculated
  • When operational businesses such as LLCs or LPs incur this tax
  • How the filing process works

What is Unrelated Business Income Tax When Investing in Real Estate With a Loan?

In this brief video, you will learn:

  • How UBIT is determined when borrowing money to acquire income-producing real estate in an IRA
  • How this tax is determined in relation to real estate investing
  • How much profit you can make before you’re subject to this tax (with hypothetical examples)

Want even more details?

This report is a great resource to share with your CPA, tax professional, or other members of your financial team.

Understanding Unrelated Business Taxable Income within an IRA

  • When does UBIT apply?
  • Guidelines for using debt financing in an IRA

For more frequently asked questions, please visit the FAQ page.

Need help filing a 990-T form?

To assist you in meeting filing requirements, Equity Trust Company is again offering Form 990-T preparation and IRS required electronic payments through the EFTPS (Electronic Federal Tax Payment System) to our clients for their IRAs. To learn more about your 990-T filing options please visit:

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