UBIT Taxes in Solo 401k

[Grant Huggins]

Have a Solo 401k that owns a couple of rental properties. Now rehabbing a new property I intend to flip, but discovered the UBIT tax issue. Several references discuss how holding for over a year avoids UBIT. One reference says that if the majority of fund properties are long term rentals and you have an occasional flip, it does not trigger UBIT. Any experience here on this issue?  

[Brian Eastman]

@Grant Huggins 

The IRS language is as follows:  If a tax exempt entity engages in a trade or business on a regular or repeated basis, then UBIT applies.

A single flip on rare occasion mixed into a portfolio of largely passive investments would not "likely" be subject to UBTI, with the caveat that the IRS has the final determination should they choose to take a closer look.  A conservative approach would be that if your intent was to flip the property, then UBTI applies.

Holding a property in and of itself does not eliminate UBTI, but just makes you a slow flipper.  Holding the property as a passive rental for a period of time would eliminate teh UBTI exposure.