UBTI on leveraged real estate
While I realize UBTI of over $1000 requires filing of 990-T, depreciation on a leveraged property may very well minimize the level of net income.
However I have seen two different opinions regarding recapture- on sale of property, is accumulated depreciation added back to calculate UBIT resulting in big hit, at high marginal UBIT rate on final return? Did I once read of ruling that recapture not required to be added back when calculating UBIT? Thanks.
Permalink Submitted by mk foss on Thu, 2014-09-11 01:20
The 990-T is required when there’s a profit from leveraged real estate in a retirement arrangement. You don’t pick and choose what kind of income to report. If the depreciation causes a loss on the operation of the rental, the accumulated losses are deductible upon sale of the property. At that point, the ordinary losses may exceed the depreciation recapture.