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Private lending for home purchase on a large scale UBTI concer.

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Newly transferred from the Attorney side of things and don't have a strong grasp on the rule and regulation tendencies. I know a qualified plan can take advantage of private lending as an investment. And I understand that interest income is exempted from UBTI. However, in this case of plan lending to 3rd parties secured by first deeds of trust, while the form of the transaction does not generate UBTI, the volume of transactions will determine whether the plan is involved in an active trade or business. So assume that the volume of annual transactions does push the plan into operating a trade or business, it would follow that any such income earned, even though exempted interest, would be UBIT. Is this the proper assumption or are retirement plans simply afforded a private lending exemption from UBTI? Does the exemption differentiate between lending to participants and lending to third parties?

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Owen Meany I think "interest" for purposes of 512(b)(1) pretty much means what it says. Loan origination and servicing fees and similar revenue items that a commercial lender might typically receive in addition to interest would probably not be excluded, however.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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