UBIT only applies to property held <12 months?

[Chris Martin]

Seems to me, reading the instructions for form 990-T, that UBIT only applies to assets held less than a year. In the instructions for Line 4a—Capital Gain Net Income, the IRS says:

Generally, organizations required to file Form 990-T (except organizations described in sections 501(c)(7), (9), and (17)) are not taxed on the net gains from the sale, exchange, or other disposition of property. However, net capital gains on debt-financed property, capital gains on cutting timber, and ordinary gains on sections 1245, 1250, 1252, 1254, and 1255 property are taxed. See Form 4797, Sales of Business Property, and its instructions for additional information.

So ordinary gains on rental property are taxed. Ordinary Gains and Losses are specified on Part II of form 4797, and the instructions (http://www.irs.gov/pub/irs-pdf/i4797.pdf) say to use 1 year as the cutoff for Ordinary Gains and Losses.

Seems like selling a property held by a SDIRA account for a year or more will result in no UBIT exposure. I bring this up because I don't necessarily want to sell now, but most likely 2-3 years form now.

[Will Barnard]

UBIT can also be triggered if you use debt financing, but if your IRA pays off the debt first, then holds for 365 days, the UBIT goes away on that too.