Private Placements
I have a client that would like to invest in a friends LLC with in her IRA. I found a custodian that will hold the IRA, but what are the tax implications, if any?
Do I have to watch out for UBTI if the funds are qualified?
I have a client that would like to invest in a friends LLC with in her IRA. I found a custodian that will hold the IRA, but what are the tax implications, if any?
Do I have to watch out for UBTI if the funds are qualified?
Permalink Submitted by mk foss on Wed, 2009-02-04 22:09
Yes, you need to watch out for UBI when an IRA invests in another entity. The UBI tax is really a double tax on the income. The IRA must pay the tax (figured at compressed rates that apply to trusts) and then when the after tax funds are distributed, the owner pays tax again.
If the owner were to pay the UBI tax, it would be an excess contribution and subject to penalties.