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UBIT for Self-Directed IRA
Hello BP,
Can someone help explain why self-directed IRA's are subject to UBIT tax on non-recourse loans but a solo 401k is not? I understand that the 401k is considered a "qualified plan" but, in my eyes they both have the same tax benefits, just different contribution limits.
Thank You in Advance,
Chris
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Dmitriy Fomichenko
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UDFI is not a tax, it stands for Unrelated Debt Finance Income, more on that here:
https://www.irs.gov/pub/irs-te...
If such income is generated in an IRA - this income is subject to Unrelated Business Income Tax or UBIT.
Such income generated in a 401k however would be exempt from UBIT.
- Dmitriy Fomichenko
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