@William RugenI just estimated that 67% for illustrative purposes.

5)  90%+ of  the sub 50K properties that I have sold have been to retail buyers and as I illustrated previously are not in the worst part of town

The numbers will work out fine, but that just illustrates why there's a difference in value between land and a shovel-ready project... and why the details of the lot (and surrounding infrastructure) really, really matter when doing stuff like this. 

Let's assume for illustration purposes that the taxable LLC and the self-directed IRA form a new LLC with each being a member. 

I was just using this deal to illustrate an example. 

Detail should not be extreme, but adequate to illustrate accurately the nature and amounts of expenses.

So, I stand by my response to the original poster's question about what he should do in a situation such as was illustrated in his example.

Chris,Here is an example which may better illustrate why UBIT is necessary and fair:Two coffee shops on opposite corners of the street.

@Roy N.Thanks for the illustration.

Michael - David's recent story and your account on this property are great illustrations of what is happening across the entire spectrum of real estate investing right now.