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UBTI in IRA


Guest TPALona
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Guest TPALona

IRA has investment in real estate resulting in UBTI. We understand the need for filing a Form 990-T to report the UBTI. But who pays the taxes? If the IRA pays the taxes wouldn't this be treated as a distribution? IRA owner would then need to pay tax on the IRA distribution? Can taxpayer pay the taxes with outside assets?

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It is a liability of the IRA. It should not be a taxable distribution if IRA money is used to pay the IRA's tax liability. Not sure there is a specific IRS statement to that effect, but it seems logical to me. (There may be IRS guidance confirming this in the qualified plan space, and if so I believe the same should apply to IRAs.)

Using the same logic, I would think that the depositor's payment of the tax should be treated as an IRA contribution.

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