UBIT Self Directed IRA (wholesaling)

Specialist · Columbus, GA · Member since 2016 · 146 posts · 54 votes

greetings. Got a first world problem on my hands here that hopefully others can learn from as well... I have a SDIRA with equity trust and was told I could cherry pick wholesale deals that I wanted to involve with my LLC to fund some of the profit to my SDIRA tax free. Here I am years end and my cpa is telling me it’s subject to unrelated business expense tax. Basically the SDIRA and my llc went 50/50 on a few deals taking on no debt and I never touched the money that went to my SDIRA. Equity trust is saying one thing and my cpa another. What do you think? I thank you in advance. -Dave Goings

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Steven Hamilton IIPro Member

Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes

Yes, it IS SUBJECT to UBIT.
The other issue I would be careful about is you cannot earn on the same transaction your IRA does. It could be argued you are doing an activity to personally benefit your IRA if your IRA does not take title to the property at any time.

You may want to reach out to me to discuss how your IRA and LLC Partnered because you may have engaged in a prohibited transaction already.

[email protected]224-381-2660

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George Blower
Retirement Accounts Attorney · Southfield, MI · Member since 2017 · 3k+ posts · 1k+ votes
7y
@Alan Johnson
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David Oldenburg
Lender · Granite Bay, CA · Member since 2014 · 456 posts · 454 votes
7y
It would be great for someone with actual knowledge to post some case law. There is a lot of copy and paste here of the IRS rules, which I think we all know if we have studied the subject of SDIRA's and Solo 401k's...
it would be helpful to know if anyone has ever survived an IRS audit and avoided UBIT who was wholesaling? I have heard great responses both for and against it, but no one who has been there and done it. Has anyone here actually been audited and what were the actual results etc... and what did the IRS tell you in their findings?
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @David Oldenburg:
It would be great for someone with actual knowledge to post some case law. There is a lot of copy and paste here of the IRS rules, which I think we all know if we have studied the subject of SDIRA's and Solo 401k's...
it would be helpful to know if anyone has ever survived an IRS audit and avoided UBIT who was wholesaling? I have heard great responses both for and against it, but no one who has been there and done it. Has anyone here actually been audited and what were the actual results etc... and what did the IRS tell you in their findings?
good question.. but I learned of UBIT 25 years ago.. not sure anything has changed.. by the time you get audited and create case law you probably spent more on legal fee's than most have in their IRA. LOL

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