topic Real Estate Funds & UBTI in a IRA in Retirement tax questions

Real Estate Funds & UBTI in a IRA

CurtisStevens — Wed, 31 Mar 2021 19:47:39 GMT

Let's say you wanted to invest some of your IRA money with a real estate fund. You will have an "interest," be a member of this fund who owns the property. The fund is setup as a partnership so you will get a K1. Assuming you don't do any prohibited transactions. When would UBTI come into play? I've researched it to death and can't figure out the answer.

Thanks!

Curtis

Re: Real Estate Funds & UBTI in a IRA

TomD8 — Wed, 31 Mar 2021 19:57:39 GMT

Taxes due to UBTI earned within an IRA are normally handled by the IRA trustee or custodian, even if the K-1 goes to the account owner. Check with the firm that holds your IRA as to their policy and practice.

Re: Real Estate Funds & UBTI in a IRA

CurtisStevens — Wed, 31 Mar 2021 21:21:36 GMT

I'm just trying to figure out which of the gains would be taxable to see if it makes sense vs the stock market for example. Distributions, capital returned during refinancing or capital gains during the sale/exit?

They just say: If there is UBTI, IRS Form 990-T must be filed and the taxes must be paid from the IRA. We recommend that you consult with your tax advisor to determine if there is any UBTI.

Re: Real Estate Funds & UBTI in a IRA

TomD8 — Thu, 01 Apr 2021 13:49:03 GMT

Fidelity's website has a good explanation of what UBTI is, and of the tax aspects.

https://www.fidelity.com/tax-information/tax-topics/ubti