SDIRAs, UDFI and UBIT

[Daniel Cruz]

Hi All,

I am researching buying rental property w/ a SDIRA. And after talking to a SDIRA custodian, she schooled me on non-recourse loans and the taxes associated w/ purchasing leveraged property.

So I am wondering is there a way to avoid the UDFI taxes short of purchasing the rental free and clear? If I create a LLC and the IRA invests in the LLC, then if the LLC buys rental property can the UDFI taxes be avoided?

Also in the long run, is it more beneficial to buy the rental free and clear or to just pay the tax?

One more thing, is UDFI similar to UBIT? What’s the dif?

I know you may not be an accountant – I promise not to sue. :-)

Thanks for your time…