Solo 401K And Ubit Questions

[John Thedford]

I started doing private lending in 2012 with my Solo 401K. I has been a steady source of income into the retirement account. My CPA states this actions falls under UBIT? I have been led to believe it is not and does not fall under UBIT. He asked me to pose this to some other CPA and retirement account professionals. Isn't this the same as buying stocks, etc?  None of the loans are recourse loans. Thoughts?

[Brian Eastman]

@John Thedford

Interest is a form of passive income not subject to UBTI.  Have your CPA read IRS publication 598.

Unrelated Business Taxable Income is generated when a tax exempt entity engages in a trade or business on a regular or repeated basis.  Repeated quick flipping of houses, short term rentals (a services business), certain venture capital and things of that nature will generate UBTI.

Passive forms of income such as interest, dividends, royalties, rent from real property, and the sale of an asset held passively over time will not produce UBTI.