IRA and Non-Recourse Lending

[Guest SSSP]

I am in disagreement with a CPA on this issue and would love feedback. It relates to an IRA borrowing or leveraging from others (e.g., individuals, financial institutions). And, while I don't believe it makes a difference (please tell me otherwise please), the account is a Roth IRA.

Question: Can any IRA borrow or leverage funds and not be subject to UDFI?

My position is that UDFI applies to any leveraged activity within an IRA. It is my understanding that a 401k has an exemption...for real estate only; however, the IRA, if it borrows and generates profits, UDFI taxes are due on the percentage of gains realized with borrowed funds (e.g., $50,000 IRA borrows $50,000 to purchase a $100,000 property...property sold later for $200,000...UDFI and taxes would be due on 50% of the profits, or in this case $50,000)?

CPA says that IRA could borrow or leverage and generate gains with no taxes immediately due.

I am pretty sure that I am right, but I am just questioning if it makes any difference if the IRA is a Roth...but, I don't think so.

Thanks.

[Lou S.]

I agree with you.