SD-IRA and UBIT questions

[Kent Chrisman]

I'm looking into setting up a SD-IRA with an old employer retirement account in order to get into a syndication but I have 2 questions:

- I'm assuming that I will be subject to UBIT due to the operator/syndication getting financing in order to acquire the property. After all depreciation and operating expenses are subtracted from my SD-IRAs share of the profits, will the tax liability be paid from the SD-IRA or my own pocket? I'd assume out of the IRA...

- Since SD-IRAs are tax deferred and assuming that for the life of the SD-IRA I am paying UBIT, will I also have to pay income taxes upon receiving distributions or dissolving the SD-IRA after the age of 59 1/2?

Thanks for your input

[George Blower]

@Kent Chrisman

1. UBIT may or not apply. It depends if the entity offers goods or services. However, UDFI may apply if the investment sponsor reports it as such on the k-1, part II, K. 

2. If UDFI applies, it would be paid by the IRA and using IRA funds.

3. Yes once you begin IRA distributions earned income taxes will apply.

5. Lastly, Form 990T will need to be filed if UDFI applies.