UBTI on qualified plan asset

Does the unrelated business income tax (taxable income?) affect shares owned by an accredited investor/participant in a limited partnership inside his qualified plan?  Does the result automatically make the gains in the investment taxable even though held in a qualified plan?  Would welcome any advice/direction for those who have knowledge/experience in this......thanks.

3 hours ago, KevinMc said:

Does the unrelated business income tax (taxable income?) affect shares owned by an accredited investor/participant in a limited partnership inside his qualified plan?  

Are you saying you have a limited partnership that is an asset of a retirement plan?  I'm not sure what your question means, but if that particular investment produces UBTI (unrelated business taxable income), then the appropriate rules apply and the PLAN will have to file a taxable return (assuming the amount rises to the reportable amount).  Whether there is an accredited investor who is a participant is immaterial to the determination of UBTI, so I'm not sure why you bring that up.

3 hours ago, KevinMc said:

 Does the result automatically make the gains in the investment taxable even though held in a qualified plan?  Would welcome any advice/direction for those who have knowledge/experience in this......thanks.

There is no "automatic" anything.  Again, IF the income is UBTI, then the rules for UBTI applies to the plan and the plan would have to file.  

Does that get at your question?  If not, come back and be clear as to the issue.

If a qualified plan holds an LP or LLC interest and the K-1 has UBTI on it (e.g., active business income, oil & gas working interest, leverage that doesn't meet the 514(c)(9) rules, etc.), and the amount exceeds $1,000, the plan must file a 990-T and pay UBIT. If you're lucky, the plan will have provisions allocating the tax expense to the account invested in the asset (or the participant will be understanding), and the account will have enough liquid assets to pay the tax.

On 1/24/2020 at 3:51 PM, Luke Bailey said:

If a qualified plan holds an LP or LLC interest and the K-1 has UBTI on it (e.g., active business income, oil & gas working interest, leverage that doesn't meet the 514(c)(9) rules, etc.), and the amount exceeds $1,000, the plan must file a 990-T and pay UBIT.

One of my clients - a small 401(k) plan sponsor, emailed me copies of three K-1's they received for 2020, which is the first year their plan invested in these gas and oil businesses (LP's). The K-1's together show ordinary business income totals about $1,600. So, based on your quote it appears my client must file a 990-T for the 2020 UBTI under their their 401(k) plan. Sound right? This client's CPA thinks UBTI does not apply to a 401(k) plan. Obviously, there is a lot I am missing. 

The UBTI rules certainly apply to a 401(k) plan. Oil and gas interests can be tricky, but usually "working interests" can generate UBTI, AJC.