Important rules to remember about investing in an entity within a qualified account include:
If you are purchasing ownership of an existing entity total ownership of disqualified individuals (including you) cannot be 50% or greater
Also, IRC 4975 prohibits investments where the managing member is more than 10% interest owner and also a disqualified individual
Your limited partnership or LLC may be subject to Unrelated Business Income Tax (UBIT)
UBIT is the tax on unrelated business income, which comes from an activity not related to the tax-exempt purpose of the organization. IRS Publication 598 provides instruction and details on how to determine if a normally tax exempt entity/organization is required to claim Unrelated Business Taxable Income
You should discuss UBIT situations with your CPA/tax advisor
You many not invest in stock of a subchapter “S” corporation
Any earnings from the entity must return to your qualified account
For the complete list of rules please visit IRS.gov
15-Minute Guide to Private Equity Investing
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Equity Trust Company is a directed custodian and does not provide tax, legal or investment advice. Any information communicated by Equity Trust Company is for educational purposes only, and should not be construed as tax, legal or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional. Equity Institutional services institutional clients of Equity Trust Company. Brokerage Services Available Through ETC Brokerage Services, Member SIPC, and FINRA. *Founded in 1974 | Self-Directed IRA Custodian since 1983. The predecessor business to Equity Trust Company was established in 1974 and the IRS approved as a custodian in 1983. **Assets under custody as of 3/31/2021.
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