UBIT for Self-Directed IRA

[Chris Odell]

Hello BP,

Can someone help explain why self-directed IRA's are subject to UBIT tax on non-recourse loans but a solo 401k is not? I understand that the 401k is considered a "qualified plan" but, in my eyes they both have the same tax benefits, just different contribution limits.

Thank You in Advance,

Chris

[Dmitriy Fomichenko]

UDFI is not a tax, it stands for Unrelated Debt Finance Income, more on that here:

https://www.irs.gov/pub/irs-te...

If such income is generated in an IRA - this income is subject to Unrelated Business Income Tax or UBIT.

Such income generated in a 401k however would be exempt from UBIT.