roth ira and ubit
I would like to know, if I purchase a house in full (no loans) using money from my roth ira (as a roth asset) is it subject to ubit?
What conditions would the roth be taxed under ubit rules ?
Also, once I tranfer title to mysef (over 59 1/2 and roth > 5 years), am I corrrect that it is considered a non-taxable distribution ?
thank you
Permalink Submitted by Alan Spross on Wed, 2010-10-27 02:34
If you purchase a rental with cash and simply collect passive rental income without buying and selling or conducting other business activities from the rental, you should not generate any UBIT. Note that any personal use of the property is a prohibited transaction, ie the house must be a rental or just sit there vacant.
Once the Roth is qualified, you can distribute the house to yourself tax and penalty free. You would just enter the net proceeds on line 15a of Form 1040.
Permalink Submitted by Frank on Wed, 2010-11-03 02:08
Understood.
Once the house is purchased in the roth, can I use money in the roth to renovate the property, before I transfer it into my name ?
Permalink Submitted by Alan Spross on Wed, 2010-11-03 02:59
Not only can you, you MUST use Roth funds for maintenance, property taxes etc. Otherwise you are enhancing your investment with non IRA money and that is a prohibited transaction. This illustrates the budgeting challenges of buying property as an IRA asset.