Self directed "checkbook" LLC IRA

[Chuck Brickman]

Does anyone currently use this medium for their Ira? I've been getting some conflicting information about the "checkbook" approach.

Thanks

[Jeff S.]

The IRS doesn't define flipping or rehabbing with respect to UBIT, that I've ever found. Please chime in if you have a reference. Flipping is just another business activity and it considers your IRA just another organization, as should you.

You can read the code, specifically 26 U.S.C. §408 for IRA's (see §408(e)(1)) and 26 U.S.C. §511 for UBIT, but the best place to learn in real English is the IRS website definition itself itself and also IRS Publication 598. This publication actually presents many examples of organizations that are and are not subject to UBIT. It’s not for the faint of heart but not too bad. Tie your shoes tight and drink plenty of coffee before you begin.

Here’s the bottom line, direct from the IRS:

For most organizations, an activity is an unrelated business (and subject to unrelated business income tax) if it meets three requirements:
1. It is a trade or business,
2. It is regularly carried on, and
3. It is not substantially related to furthering the exempt purpose of the organization.

Jon’s repossession would not be subject to UBIT because it was not a part of his business that he regularly carried on (at least not hopefully).

Jeff