UDFI Difference in Loan vs Partnership?

[Daniel Dietz]

Hello All, 

I have been using SDIRA and SOLO401Ks for some time and understand when *I* have to pay taxes related to borrowing money. 

Where I have a questions now is that I have a potential 'investor' who might be interested investing in buy-n-hold properties with me by either; 

1) lending me the down payment portion from their SDIRA at a set interest rate and term which I would use to take out a portfolio loan (20% down). They would not get any profits other than the predetermined interest rate.

OR

2) 'Partner' with me by putting up the down-payment towards a portfolio loan (20% down) using funds from their SDIRA without a 'set rate' of return and we would split the profits in some way. 

Our preference would be option #2 most likely. 

I am having a hard time wrapping my head around how the taxes UDFI taxes would work in option #2. Say if we partnered on a 100K property using their SDIRA funds as a 20K (%) down payment, and borrowed 80K and were 50/50 partners. I am thinking this would be in an LLC with each of us being 50% partners. What would be the effect on either of us as far as UDFI taxation goes?

Thanks, Dan Dietz