Taxpayer has a Roth IRA valued at $400K. Roth IRA creates an LLC and funds it with $200K. LLC buys a house. Taxpayer rehabs it with costs coming from LLC. House is sold with a profit of $100K All funds are put back into the Roth IRA.
Assume all of the above is perfectly legal and answer the following question.
Is the $100K investment income, is it UBI, or is it something else.
Dick
Can an IRA have UBI? I've been wrong before and I'll be wrong again (hopefully not too often) but that doesn't make sense. The business purpose of an IRA is to invest in things that generate profit. So anything that does that should be ok.
At least, that's the way it seems to me.
I am NOT an accountant, but last year I received some 1099's for a few purchases I had in my IRA's. When I looked into it, I found that an IRA can very definitely have UBIT from certain types of income, unless the rules have changed in the past year.
See
Also, see Pub 598 where it specifically includes IRA's as being subject to the tax.
subject to the tax.
An excellent article and I thank you for posting here.
Glad to help. People here have helped me in the past.
My "lay" interpretation is that the gain would probably be UBIT, but I leave that determination to those more knowledgeable.
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