It it not entirely clear what your question is.Taking a shot in the dark, Unrelated Business Income Tax (UBIT) applies whenever a tax exempt entity (Solo 401k, IRA, or any other type of non-profit) engages in a trade or business on a regular or repeated basis. refer to IRS Publicaton 598.Income derived from passive investments such as rent from real property, interest, dividends and royalties is not subject to such taxation.UBIT was created by congress long before IRA and 401k plans existed, to prevent tax-exempt entities from driving taxpaying businesses out of business.  

The real estate is effectively inventory in a sales business, just like refrigerators or stereos.Passive sources of income such as interest (i.e. hard money lending), rents from real property, dividends and royalties are not subject to UBIT.This concept is documented in IRS publication 598.The ROBS program is an entirely different structure as compared to a self directed IRA.  

Generally, property held for the production of rents or royalties is considered to be used in a trade or business. 

Check if high speed internet and cable service includes a royalty to the landlord.

Look if you are living in America with running water and electricty much less heat, hot water and a refrig/tv you are living better than royalty a couple hundred years ago. 

Flipping is, however, considered a trade or business activity and not a passive income stream such as rental income, interest, dividends or royalties.  

Nevertheless, yes I am a professional with an album and a thousand live shows under my belt and actual royalties from my songs being streamed and played.

The three categories are as follows:• Category 1: Gross income from interest, dividends, annuities, royalties, and rents, which is not derived in the ordinary course of an active trade or business.• Category 2: Gross income from a trade or business that is a passive activity or a trade or business of trading in financial instruments or commodities.• Category 3: Net gain (to the extent taken into account in computing regular taxable income) attributable to the disposition of nonbusiness property and property other than property held in a trade or business to which the 3.8% NIIT does not apply.

3)  Everyone knows with Franchises that you pay Royalties to Corporate. 

@Jocelyn DoumaniCollect royalties...or just enforce your lease that if he breaks the law you can evict.