Do I need to file a 990-T form for UDFI?

Question

Hi, how can I tell if I need to file a 990-T form on a multi-family syndication investment based on the K-1 form sent to me? Part III #1 line has zero ordinary income and #2 line has negative net rental real estate income.  No other income listed for part III.  This is the first year K-1 for this syndication.  However, the information for Box 20, code V lists a high dollar amount and that is what I've been told is the line for UBTI.

Dmitriy Fomichenko · Answer

@Anna Nguyen

Did you invest with self-directed IRA or self-directed Solo 401k?

The latter would be exempt from UBIT on leveraged real estate. IRA however would have to declare UDFI and pay taxes on it. BUT, since this is the first year there are likely losses passed to you as a result of accelerated depreciation and cost segregation strategies that the sponsor likely employed so there shouldn't be any tax liability. But it would be best for you to consult qualified tax professional regarding your particular situation and not rely on opinions in a public forum.

Michael Plaks · Answer

Account Closed

Your SDIRA incurred a loss, so there's no 990-T needed for 2020.

In a future year when/if your SDIRA receives income over $1,000 you may need to file this form. K-1 itself will not have the data necessary to prepare that form though. You will need additional details from the CPA firm that prepares taxes for the syndication.