fbpx
Call: 1-866-454-2649   Text: 702-728-3322

Self Directed IRA – Unrelated Debt Finance Income (UDFI)

A subset of UBIT is the Unrelated Debt-Financed Income (UDFI) tax. Under IRC § 514, the IRS will assess a tax on any income that is derived from the use of “acquisition indebtedness” in passive Self Directed IRA investments. For example, if your Self Directed IRA uses $30,000 of its own funds and also borrows […]

Read More…

Self-Directed IRA Unrelated Business Income Tax (UBIT)

This is an important topic because many people, especially those who have never had a self-directed ira, are unaware of the tax treatment for certain types of investments. UBIT was never an issue when investing in the set of mutual funds, or individual stocks, offered by a brokerage IRA account. Such investments simply earn dividend […]

Read More…

Top 10 Self Directed IRA/401k Mistakes – #10 Self Directed IRA Owners Flipping Real Estate is Not UBTI

The receipt of rental income is considered to be passive income and therefore not subject to UBTI. However, some self directed IRA owners fall into the trap of thinking that this means that they can buy and sell properties on a routine basis (i.e. flipping), and that this would not be active income or running […]

Read More…

Top 10 Self Directed IRA/401k Mistakes – #9 Self directed IRA owner attempts to receive fees and commissions from IRA transactions

There are cases where the self directed IRA owner is a real estate agent and they want to earn a commission from selling property to their IRA or some other disqualified party’s self directed IRA. Such a transaction would be viewed as conducting a transaction with your IRA or receiving an indirect benefit. Either way, […]

Read More…

Top 10 Self-Directed IRA/401k Mistakes #8

Number 8: Self-directed IRA owner thinks a passive investment in the active business is not subject to UBTI UBTI is the tax that levels the playing field for tax-exempt entities that invest and compete against businesses that pay taxes. Self-directed IRA account owners find a unique business or investment opportunities in small businesses. Even though the […]

Read More…

Top 10 Self Directed IRA/401k Mistakes – #7 IRA owner uses personal assets or “Sweat Equity” for the benefit of the IRA

A self directed IRA owner is clearly allowed to guide and manage the investments of the self directed IRA. The management can be relatively involved and substantial. As an example, the self directed IRA owner (or even the self directed IRA LLC manager – the account owner), could potentially expend considerable effort in finding the […]

Read More…

Top 10 Self Directed IRA/401k Mistakes – #6 Two or more IRA owners agree to “loan” each other money to avoid prohibited transactions

Interacting with your IRA is considered a prohibited transaction. So, unrelated, self directed IRA owners will attempt to enter into a reciprocal agreement to loan each others self directed IRA money so that the IRA owners can indirectly tap their funds for personal use. This is a flawed design and approach. Even though the parties […]

Read More…