topic Retirement investment with Self-directed IRA in Real estate residential rentals(UBIT tax) in Get your taxes done using TurboTax

Retirement investment with Self-directed IRA in Real estate residential rentals(UBIT tax)

martin_444 — Tue, 24 Mar 2020 12:41:13 GMT

Hello,

I made an investment using my Traditional IRA, via custodian, into real estate residential rentals. A special type of LLC was created (check book) for it.

There is more info:

https://www.theentrustgroup.com/investments/private-placements-llcs/checkbook-control

I guess, in this case, it's referred as "Self-directed IRA".

Here it says that this type of business is exempt from UBIT tax:

https://sdirahandbook.com/ubit-udfi-taxes/ubit-tax-and-self-directed-iras-3-key-[product key removed]tor-should-know/

I know that the custodian company reports to IRS current value of the properties.

My questions is - is there something must be done from my part with tax reporting?

I mean, ok, if I am exempt, should I still file something?

Thank you!

Re: Retirement investment with Self-directed IRA in Real estate residential rentals(UBIT tax)

macuser_22 — Tue, 24 Mar 2020 15:43:59 GMT

Unrelated business income is reported on a 990-T form.

If you hold a Limited Partnership or LLC in your IRA then any Unrelated Business Income in excess of $1,000 is taxable (even though it is in an IRA). It is not reported on your tax return but on a 990-T form. (The custodian of your IRA is required to file the form for you but you must submit the K-1 form(s) to them - ask the custodian about this).

Unrelated Business Income is reported as code "V" in box 20 on the K-1 form.

Also see pub 598.
http://www.irs.gov/publications/p598/ch01.html

Per the 990-T Instructions: https://www.irs.gov/pub/irs-pdf/i990t.pdf

"Who Must File
Trustees for the following trusts that
have $1,000 or more of unrelated trade or
business gross income:
1. Individual retirement accounts
(IRAs), including traditional IRAs"
4. Roth IRAs described under section
408A,

Re: Retirement investment with Self-directed IRA in Real estate residential rentals(UBIT tax)

martin_444 — Wed, 25 Mar 2020 23:22:07 GMT

If you scroll down to "rents":

https://www.irs.gov/publications/p598

https://www.irs.gov/publications/p598#en_US_201901_publink[phone number removed]

"Rents.

Rents from real property, including elevators and escalators, are excluded in computing UBTI. Rents from personal property aren’t excluded. However, special rules apply to "mixed leases" of both real and personal property."

I don't rent a personal property and it's not debt-financed.

So, I guess, I don't need to pay UBTI. But I am still not sure if I need to file out some kind of form.

There is no Form K1, there is a schedule K-1 and it has something to do with partnerships.

https://www.irs.gov/pub/irs-pdf/f1065sk1.pdf

Re: Retirement investment with Self-directed IRA in Real estate residential rentals(UBIT tax)

KathrynG3 — Sat, 28 Mar 2020 18:00:17 GMT

Yes, you are correct. If you do not have UBTI and your LLC is a single member LLC, then you do not need to file anything.

Re: Retirement investment with Self-directed IRA in Real estate residential rentals(UBIT tax)

martin_444 — Sun, 12 Apr 2020 13:11:05 GMT

Thank you so much!