Unrelated Business Taxable Income

[jane123]

Are there any circumstances that would allow the SIMPLE IRA owner to pau the UBTI tax out of poket/ In other words, must this payment to the IRS always be take from the IRA?

Question # 2. What happens if the IRA transferred out before the payment was deducted from the account or if the IRA does not have sufficient balance to pay the tax?

[Gary Lesser]

The IRA is subject to the UBI tax (if the UBTI is in excess of $1,000) per year. The tax is imposed on the IRA for UBTI caused by operating a business or investing in debt-financed property. In most likelyhood, the IRA trustee will have to pay the amount and the owner may be responsible for reimbursing the trustee. WHAT does the document say about the payment of taxes (or how does the plan sponsor interpret the agreement)?

If the tax is paid by the individual, it would be treated as a contribution to the IRA and subject to the annual limit amount (generally $3,000). If the amount can be rolled back into the IRA (or transfered from another IRA) and the taxes paid from the IRA the taxable distribution amount may be lowered.