What is UBIT?
First of all, let’s clear up what UBIT stands for… UBIT stands for Unrelated Business Income Tax.
When It Applies
UBIT applies when an Plan engages in a trade or business. Were you to purchase a coffee shop with your Solo 401(k), it would trigger UBIT. Were the Plan to buy a farm or ranch, the operation of the farm or ranch would trigger UBIT.
How Its Calculated
When UBIT is triggered, the tax that is due, is due at the trust rate. Solo 401(k) are technically tax-exempt trusts, so any tax the Plan might owe is going to be calculated at the trust rate. It is best to consult a tax professional to ensure the tax is correctly calculated and reported.
Solo 401(k)s are EXEMPT from UDFI for Real Estate!
We’re Here to Help
We are always happy to talk with you about UBIT & UDFI. If you have an investment in mind and wonder if it might be subject to UBIT, call us. We’re available to you, even after we set you up. If your CPA is unfamiliar with these issues, we’ll be happy to refer you to the one we use.
Jordan Sheppherd, Owner
Check Book IRA, LLC