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  • UBIT Information
    • UBIT Explained: An Overview
      • What Is UBIT?
      • When Does UBIT Occur?
      • Why Do I Have to File in an IRA
      • Isn’t UBIT a Double Taxation?
      • Why You Should be Glad to File
      • Turning a Net Operating Loss into a Gain
      • What Tax Schedule to Follow?
      • Understanding the Process
      • FAQs
    • Real Estate IRAs and UBIT
      • Your Real Estate IRA Investment Options
      • Why Debt Financing with a Real Estate IRA Investment Can be Beneficial
      • Obtaining Non-Recourse Loans and Finding Non-Recourse Lenders
      • Real Estate Frequently Asked Questions
        • What Allocation of Income is Subject to UBIT?
        • How does Flipping or Wholesaling Real Estate Relate to UBIT?
    • Entities and UBIT
      • Why Does my IRA Have to Pay Taxes when Investing in a LP or LLC?
      • When Does my IRA Have to Pay UBIT When Investing in a LP or LLC?
    • Financial Advisor/CPA Overview
      • Calculating, Filing and Paying UBIT
      • UBIT at the State Level
      • UBIT and Multiple IRAs
  • 990-T Filing Solutions
  • About Us
  • Testimonials
  • Resources
  • Contact Us
UBIT Professional
  • Home
  • UBIT Information
    • UBIT Explained: An Overview
      • What Is UBIT?
      • When Does UBIT Occur?
      • Why Do I Have to File in an IRA
      • Isn’t UBIT a Double Taxation?
      • Why You Should be Glad to File
      • Turning a Net Operating Loss into a Gain
      • What Tax Schedule to Follow?
      • Understanding the Process
      • FAQs
    • Real Estate IRAs and UBIT
      • Your Real Estate IRA Investment Options
      • Why Debt Financing with a Real Estate IRA Investment Can be Beneficial
      • Obtaining Non-Recourse Loans and Finding Non-Recourse Lenders
      • Real Estate Frequently Asked Questions
        • What Allocation of Income is Subject to UBIT?
        • How does Flipping or Wholesaling Real Estate Relate to UBIT?
    • Entities and UBIT
      • Why Does my IRA Have to Pay Taxes when Investing in a LP or LLC?
      • When Does my IRA Have to Pay UBIT When Investing in a LP or LLC?
    • Financial Advisor/CPA Overview
      • Calculating, Filing and Paying UBIT
      • UBIT at the State Level
      • UBIT and Multiple IRAs
  • 990-T Filing Solutions
  • About Us
  • Testimonials
  • Resources
  • Contact Us

When Does UBIT Occur?

Home UBIT Information When Does UBIT Occur?

When Does UBIT Occur?

Generally speaking, there are two main investment categories that would generate UBTI in retirement accounts.

LP & LLC

Limited Partnerships (LPs), Limited Liability Companies (LLCs), and similar entities (such as parternships, limited liability partnerships (LLPs), etc.) that are involved in an unrelated business/operating company. (Note: Investments in C-Corporations generally do not incur UBIT because taxes are paid at the corporate level.)

Debt Financing & Leveraged Investments

Debt financing and leveraged investments, most commonly found through real estate investments utilizing non-recourse financing rather than paying 100% cash from the account.

If there is $1,000 or more of UBTI in those retirement plan investments, a Form 990-T is required to be filed. The IRS grants a specific deduction on the first $1,000 of UBTI.

Additionally, if a loss is to be carried forward or backward to offset profits in future or prior years, a filing is also necessary regardless of the $1,000 specific deduction. It is encouraged to review your situation annually to ensure you are accounting for all applicable UBTI.

To help determine if UBIT may apply to your situation: UBIT Professional Diagnostic Quiz

Which Retirement Accounts Incur UBIT?

Traditional IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs, CESAs (Educational IRAs), qualified state tuition plans such as 529s, Archer MSAs, and HSAs (Health Savings Accounts). Most charities, universities, and other non-profits are also included.

Qualified plans, such as 401(k) plans, may also incur UBIT but are subject to special rules. Please contact UBIT Professional for more information regarding UBTI within qualified plans.

For more information please see IRS Publication 598.

  • What Is UBIT?
  • When Does UBIT Occur?
  • Why Do I Have to File in an IRA?
  • Why Should You be Glad to File?
  • Understanding the Process
  • Isn’t UBIT a Double Taxation?
  • Turning a Net Operating Loss into a Gain
  • What Tax Schedule to Follow?
  • FAQs

UBIT Professional LLC specializes in Unrelated Business Income Tax and Form 990-T preparation. UBIT Professional LLC is an affiliate of Equity Trust Company, a passive custodian specializing in the custody of alternative investment IRAs. Any information communicated by UBIT Professional LLC or Equity Trust Company should not be construed as tax, legal or investment advice. Equity Trust Company, UBIT Professional LLC, and all their affiliates, representatives and officers do not provide investment, legal or tax advice. Whenever making a financial decision, please consult with your tax attorney, financial or accounting professional.

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