UBIT and UDFI estimate

[Samir Ariwala]

Hi Pros,

I am planning to invest in RE Syndication through SD IRA and want to understand tax hit on return. I will be investing as limited partner in Syndication which will then hold multi-family or commercial real estate. Most projects last few years, 70% or so financed and it will give me yearly income as well as lump sum capital gain when project closes.

Questions are

1) Am I paying both UBIT and UDFI on income or UDFI is just form of UBIT and there will be just one tax. So as ex. I have $10k yearly income, which will make $7k (10K*70%) UDFI income, minus $1k standard deduction = $6k income. And I will pay 15% on first $2300, 25% on $5450-$2300 and 28% on remaining = $345+$787.5+$154. Am I correct?

2) I was told that capital gain on lump sum money at the end is not UBIT/UDFI eligible income, rather it is capital gain and there is no capital gain tax in IRA. Is that correct or I still owe capital gain under UBIT/UDFI. Assuming $50k capital gain and trust tax rate of 15% = $7500.

3) These tax are not affecting my personal income tax bracket and filed separately, correct?

Thanks,

Samir