One question that comes up when investors hold real estate in a retirement account is the unrelated business income tax — UBIT. The fear is that holding income-producing real estate, or a leveraged real estate vehicle, inside an IRA could trigger a tax even though IRAs are supposed to be tax-deferred. For ordinary, publicly traded REIT shares, that fear is generally misplaced: publicly traded REIT dividends are treated as passive, excluded income, so holding traded REIT shares in an IRA typically does not trigger UBIT — even though the REIT itself uses leverage at the entity level, because that leverage does not pass through to shareholders as unrelated debt-financed income. The UBIT and unrelated-debt-financed-income concerns that do arise in IRAs tend to involve certain private or partnership structures, or directly debt-financed investments, rather than ordinary traded-REIT shares. So most REIT investing in an IRA is UBIT-safe; the niche risk is specific leveraged or partnership vehicles. This guide explains, educationally, what UBIT is and when it does and does not apply — it is not tax advice, so verify the current rules with your tax advisor and custodian.
What UBIT Is
UBIT — the unrelated business income tax — is a tax that can apply to a tax-exempt account, such as an IRA, when it earns income from an active trade or business that is unrelated to the account's exempt purpose. The point of UBIT is to prevent tax-exempt entities from gaining an unfair advantage by running active businesses tax-free. So when an otherwise-tax-deferred IRA earns income that looks like the proceeds of an active business rather than passive investing, that income can be subject to UBIT, calculated on the unrelated business taxable income (UBTI) the account generates.
Crucially, most ordinary investment income is excluded from UBTI. Dividends, interest, capital gains, and most rents are treated as passive, excluded income, so they do not generate UBIT — which is why typical stock-and-bond investing inside an IRA raises no UBIT issue. A related concept, unrelated debt-financed income (UDFI), can pull otherwise-excluded income back into UBTI when the income comes from debt-financed property held directly by the account. But these rules are aimed at active business income and directly leveraged investments, not at ordinary passive dividends.
So UBIT is a tax on the active, business-type or directly debt-financed income an IRA earns, while ordinary passive income like dividends and interest is excluded. UBIT — the unrelated business income tax that can apply when a tax-exempt account such as an IRA earns income from an active trade or business unrelated to its exempt purpose, calculated on unrelated business taxable income, with the related UDFI rules reaching directly debt-financed property — exists to keep tax-exempt accounts from running tax-free businesses. But dividends, interest, and capital gains are excluded. Understanding what UBIT targets frames why REITs usually escape it. UBIT is a tax on active or directly debt-financed income inside an IRA; ordinary passive income like dividends is excluded from it.
When REITs Trigger UBIT
For the great majority of REIT investors, the answer is that REITs do not trigger UBIT inside an IRA. Publicly traded REIT dividends are treated as dividends — passive, excluded income — so they fall squarely within the categories that do not generate UBTI. When you hold shares of a publicly traded REIT in your IRA and receive distributions, those distributions are dividends for this purpose, and dividends are excluded from UBTI. So a standard traded-REIT position in an IRA generally produces no UBIT, year after year.
What about the fact that the REIT itself borrows money to buy properties? This is the key point that reassures investors: the REIT's entity-level leverage does not pass through to you as unrelated debt-financed income. The UDFI rules apply when the tax-exempt account itself holds debt-financed property directly. But when you own REIT shares, you own stock in a corporation that happens to use leverage — your income is a dividend from that corporation, not directly debt-financed income to your IRA. The corporate structure of the REIT effectively shields shareholders from the leverage, so the dividend remains an excluded dividend. That is why traded REITs are a UBIT-friendly way to hold leveraged real estate in an IRA.
So REITs generally do not trigger UBIT because their dividends are excluded passive income, and the REIT's own leverage does not pass through to shareholders as UDFI. When REITs trigger UBIT — essentially, they generally do not, because publicly traded REIT dividends are excluded passive income and the REIT's entity-level leverage does not flow through to shareholders as unrelated debt-financed income (the corporate structure shields shareholders, so the dividend stays an excluded dividend) — is reassuring for ordinary traded-REIT investors. The leverage stays at the entity level. Understanding this is the heart of the topic. Traded REITs generally do not trigger UBIT, because their dividends are excluded passive income and the REIT's own leverage does not pass through to shareholders.
(Specific facts can vary, so verify the current rules with your tax advisor and IRA custodian.)
The reassuring rule is simple: a publicly traded REIT's dividend is an excluded dividend, and the REIT's own borrowing stays at the entity level — it does not flow through to your IRA as taxable debt-financed income.
Traded REITs vs. Private Vehicles
The UBIT picture is cleanest for publicly traded REIT shares, but it can differ for some other real estate vehicles held in an IRA. The distinction is not really 'REIT versus non-REIT' so much as 'excluded dividend income versus directly held, debt-financed, or partnership-flow-through income.' A publicly traded or non-traded REIT that pays you dividends generally delivers excluded dividend income, keeping you clear of UBIT. The niche risk lies elsewhere.
Where UBIT and UDFI concerns more commonly arise is with certain private or partnership structures, or with directly debt-financed investments held inside the IRA. For example, an IRA that invests in a real estate partnership or LLC taxed as a partnership may receive a Schedule K-1 reporting income that can include UBTI, and if that vehicle uses leverage, the debt-financed portion can flow through as UDFI to the IRA. Similarly, an IRA that buys real estate directly using a mortgage can generate UDFI. These are the situations that produce UBIT surprises — not ordinary traded-REIT shares, whose dividends remain excluded. So the vehicle's structure, not the mere presence of real estate or leverage, determines the UBIT outcome.
So traded REITs deliver clean, excluded dividend income, while the UBIT and UDFI risks concentrate in private or partnership vehicles and directly debt-financed investments. Traded REITs versus private vehicles — traded (and non-traded) REIT shares delivering excluded dividend income that keeps an IRA clear of UBIT, versus certain private or partnership structures (which can pass through UBTI or, when leveraged, UDFI on a K-1) and directly debt-financed IRA investments (which generate UDFI) carrying the real risk — is the distinction that matters. Structure, not the presence of real estate, drives the result. Understanding it tells you where to look. Traded REIT shares deliver excluded dividend income, while UBIT and UDFI risks concentrate in private or partnership vehicles and directly debt-financed IRA investments.
- UBIT is a tax on active-business or directly debt-financed income earned inside a tax-exempt account like an IRA.
- Publicly traded REIT dividends are excluded passive income, so traded REIT shares generally do not trigger UBIT in an IRA.
- A REIT's entity-level leverage does not pass through to shareholders as UDFI — the corporate structure shields you, so the dividend stays excluded.
- The real UBIT and UDFI risk lies in certain private or partnership vehicles and directly debt-financed IRA investments — not ordinary traded REITs.
Avoiding UBIT Surprises
The way to avoid a UBIT surprise is to understand what you are actually holding inside your IRA. For ordinary publicly traded REIT shares and REIT funds, there is generally nothing to worry about — the dividends are excluded, and no UBIT arises. The surprises tend to come from less obvious holdings: a self-directed IRA that invests in a real estate partnership or LLC, a private fund that uses leverage and reports income on a K-1, or directly held real estate that the IRA financed with a mortgage. In those cases, UBTI or UDFI can be generated, and if the account's UBTI exceeds the annual threshold, the IRA may owe UBIT and have to file a return (Form 990-T).
Before adding a real estate vehicle to a self-directed IRA, it is worth asking how the income will be characterized: Will I receive dividends (excluded), or partnership flow-through income that could include UBTI? Does the vehicle use leverage in a way that creates UDFI for the IRA? Will I receive a K-1, and could it report UBTI? Your IRA custodian and your CPA can help answer these questions before you invest, so there are no surprises at tax time. For the typical investor holding traded REITs in an IRA, none of this applies — but for self-directed IRA investors venturing into private or leveraged structures, asking these questions up front is the safeguard.
So avoiding UBIT surprises means knowing whether your IRA holding produces excluded dividends or potential UBTI/UDFI, and checking before investing in private or leveraged vehicles. Avoiding UBIT surprises — recognizing that ordinary traded REIT shares and funds raise no UBIT issue, while self-directed IRA investments in real estate partnerships, leveraged private funds reporting K-1 income, or directly mortgaged property can generate UBTI or UDFI (and potentially a Form 990-T filing), and asking how the income will be characterized before investing — is mostly about understanding what you hold. The traded-REIT investor is safe; the self-directed investor should ask first. Understanding this prevents tax-time surprises. Avoid UBIT surprises by knowing whether your IRA holding produces excluded dividends or potential UBTI/UDFI, and by checking private or leveraged vehicles before investing.
The surprise is never the ordinary traded REIT — it is the self-directed-IRA detour into a leveraged private fund or directly mortgaged property, where partnership flow-through or debt-financed income can quietly create UBTI.
Coordinating With Your Custodian
Your IRA custodian and your CPA are the right partners for confirming the UBIT treatment of anything you hold in a retirement account. For ordinary traded REITs at a standard brokerage IRA, there is little to coordinate — the dividends are excluded, and the brokerage handles the routine reporting. But for a self-directed IRA holding private real estate vehicles, the custodian plays a larger role: self-directed custodians handle alternative assets, and they can help you understand whether a given investment may generate UBTI, what documents (like K-1s) you will receive, and whether the IRA might need to file Form 990-T and pay UBIT from account funds.
Coordination matters because UBIT, when it applies, is paid by the IRA itself, not by you personally, and it requires a separate filing. Catching a potential UBTI or UDFI issue before you invest lets you decide knowingly whether the after-UBIT return still makes sense, and ensures the filing is handled correctly if the investment proceeds. Baker 1031 Investments does not provide tax or legal advice; we help you understand the structure and coordinate with your custodian and CPA, who confirm the specific treatment. For most REIT investors, this coordination simply confirms there is no UBIT issue — but for self-directed investors in private or leveraged vehicles, it is an important step.
So coordinating with your custodian and CPA confirms whether a holding produces excluded dividends or potential UBTI/UDFI, and ensures any required filing is handled. Coordinating with your custodian — relying on your IRA custodian and CPA to confirm UBIT treatment, which is routine for traded REITs but more involved for self-directed IRAs holding private or leveraged vehicles that may generate UBTI or UDFI (paid by the IRA itself and requiring a Form 990-T filing) — is how you turn understanding into certainty before investing. The custodian and CPA confirm the specifics. Understanding the coordination step closes the loop. Coordinate with your custodian and CPA to confirm whether a holding produces excluded dividends or potential UBTI/UDFI, and to handle any required filing — Baker 1031 does not provide tax advice.
How Baker 1031 Helps You Understand REITs and UBIT
Baker 1031 Investments helps investors understand, educationally, how UBIT applies to REITs in retirement accounts — what UBIT is, why publicly traded REIT dividends generally avoid it, why a REIT's own leverage does not pass through to shareholders, when certain private or leveraged vehicles can differ, and how to avoid surprises — so you can hold REITs in an IRA with a clear understanding and coordinate the details with your custodian and CPA.
REIT and non-traded-REIT interests and related securities are offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), and any recommendation follows a suitability review — non-traded and private REITs typically require accredited or otherwise suitable investors, while publicly traded REITs trade through ordinary brokerage accounts. Baker 1031 does not provide tax or legal advice; this material is educational, not tax advice. Your IRA custodian and CPA confirm the UBIT treatment of your specific holdings, identify whether a private or leveraged vehicle may generate UBTI or UDFI, and handle any Form 990-T filing — verify the current rules with your tax advisor, since UBIT and UDFI rules can be technical. We help you understand the structure, distinguish traded REITs from private vehicles, and access suitable offerings when appropriate, coordinating with your tax professionals. Yields and returns are never promised — past performance does not guarantee future results, and REIT share prices and distributions can fluctuate. Our role is to help you understand REITs and UBIT clearly and invest only when suitable for your goals and risk tolerance.
Frequently Asked Questions
What is UBIT?
UBIT — the unrelated business income tax — is a tax that can apply to a tax-exempt account, such as an IRA, when it earns income from an active trade or business unrelated to the account's exempt purpose. The point of UBIT is to prevent tax-exempt entities from gaining an unfair advantage by running active businesses tax-free inside an account that is otherwise tax-deferred. The tax is calculated on the account's unrelated business taxable income (UBTI). Importantly, most ordinary investment income is excluded from UBTI: dividends, interest, capital gains, and most rents are treated as passive, excluded income, so they do not generate UBIT. That is why typical stock-and-bond investing inside an IRA raises no UBIT issue. A related rule, unrelated debt-financed income (UDFI), can pull otherwise-excluded income into UBTI when it comes from directly debt-financed property held by the account. So UBIT targets active-business and directly leveraged income, not ordinary passive dividends. This is educational information, not tax advice — verify with your tax advisor.
Do REITs trigger UBIT in an IRA?
Generally no — publicly traded REIT shares held in an IRA do not trigger UBIT. The reason is that REIT distributions are treated as dividends, and dividends are passive, excluded income that does not generate unrelated business taxable income. So when you hold a publicly traded REIT in your IRA and receive distributions, those distributions fall squarely within the categories that are excluded from UBTI, and no UBIT arises. This is true year after year for an ordinary traded-REIT position. Even the fact that the REIT itself borrows money to acquire properties does not change this: the REIT's entity-level leverage does not pass through to you as unrelated debt-financed income, because you own stock in a corporation rather than directly holding debt-financed property. So for the vast majority of REIT investors, holding traded REITs in an IRA is UBIT-safe. The niche exceptions involve certain private or leveraged vehicles. This is educational information, not tax advice — verify with your tax advisor.
Why doesn't a REIT's leverage create UBIT for shareholders?
A REIT's leverage does not create UBIT for its shareholders because of the corporate structure. The unrelated-debt-financed-income (UDFI) rules apply when a tax-exempt account itself holds debt-financed property directly — for example, when an IRA buys real estate using a mortgage. But when you own REIT shares, you do not hold the underlying debt-financed property directly; you own stock in a corporation (the REIT) that happens to use leverage at the entity level. Your income is a dividend from that corporation, not directly debt-financed income to your IRA. The REIT's corporate form effectively shields shareholders from the leverage, so the dividend you receive remains an excluded dividend that does not generate UBTI. This is precisely why publicly traded REITs are considered a UBIT-friendly way to hold leveraged real estate inside an IRA — the leverage stays at the entity level and does not flow through to you. This is educational information, not tax advice — verify the current rules with your tax advisor.
What is UDFI?
UDFI — unrelated debt-financed income — is a category of income that can cause otherwise-excluded income to be treated as unrelated business taxable income (UBTI) inside a tax-exempt account. It arises when a tax-exempt account, such as an IRA, earns income from property that was acquired or held using debt — in other words, leverage applied at the account level. For example, if a self-directed IRA buys real estate directly using a mortgage, the portion of the income and gain attributable to the debt-financed part of the property can be treated as UDFI and pulled into UBTI, potentially generating UBIT. The key is that the debt must be at the account level for UDFI to apply. When you own publicly traded REIT shares, the REIT's leverage is at the entity level, not your account level, so it does not create UDFI for you — your income is simply an excluded dividend. So UDFI is mainly a concern for directly leveraged IRA investments. This is educational information, not tax advice — verify with your tax advisor.
Are non-traded REITs subject to UBIT?
Generally, a non-traded REIT that pays you dividends delivers excluded dividend income, just like a publicly traded REIT, so it typically does not trigger UBIT inside an IRA. The UBIT analysis turns on the character of the income you receive, not on whether the REIT is listed on an exchange. Because a REIT — traded or non-traded — distributes dividends, and dividends are passive, excluded income, holding a non-traded REIT in an IRA generally does not generate UBTI. As with traded REITs, the REIT's own entity-level leverage does not pass through to shareholders as UDFI, because you own shares in the REIT rather than directly holding debt-financed property. That said, it is always worth confirming the specific structure of any non-traded or private offering, since some private real estate vehicles are organized as partnerships rather than REITs and can have different UBIT consequences. So a true non-traded REIT generally is UBIT-safe, but confirm the structure. This is educational information, not tax advice — verify with your tax advisor and custodian.
When can real estate in an IRA trigger UBIT?
Real estate in an IRA can trigger UBIT in specific situations, generally involving direct leverage or partnership structures rather than ordinary REIT shares. The most common triggers are: directly held real estate that the IRA financed with a mortgage, where the debt-financed portion of the income and gain can be treated as unrelated debt-financed income (UDFI) and pulled into UBTI; and investments in real estate partnerships or LLCs taxed as partnerships, which may report income on a Schedule K-1 that can include UBTI, especially if the vehicle uses leverage that flows through as UDFI. Some private real estate funds operating an active business can also generate UBTI. By contrast, ordinary publicly traded or non-traded REIT shares pay excluded dividends and do not trigger UBIT, because the REIT's leverage stays at the entity level. So the trigger is direct leverage or partnership flow-through, not the mere presence of real estate. This is educational information, not tax advice — verify the current rules with your tax advisor.
What is the difference between a REIT and a real estate partnership for UBIT?
The difference is how the income is characterized, which drives the UBIT outcome. A REIT is a corporation, and when it pays you a distribution, that distribution is a dividend — passive, excluded income that does not generate UBTI, and whose entity-level leverage does not pass through to you. So holding a REIT in an IRA is generally UBIT-safe. A real estate partnership (or an LLC taxed as a partnership), by contrast, is a flow-through entity: it passes its income, character, and any debt financing through to its partners on a Schedule K-1. If an IRA holds a partnership interest, that flow-through income can include UBTI, and if the partnership uses leverage, the debt-financed portion can flow through as UDFI — potentially generating UBIT for the IRA. So the corporate REIT structure shields IRA investors from UBIT, while the partnership structure can expose them to it. This is a key reason ordinary traded REITs are UBIT-friendly in IRAs. This is educational information, not tax advice — verify with your tax advisor.
Do I need to file anything for UBIT on my REITs?
For ordinary publicly traded REIT shares held in an IRA, you generally do not need to file anything for UBIT, because the dividends are excluded income and no UBTI is generated. The brokerage handles routine reporting, and there is no UBIT to report. A filing comes into play only when an IRA actually generates UBTI above the annual threshold — for example, from a leveraged private real estate vehicle, a real estate partnership reporting UBTI on a K-1, or directly debt-financed property in a self-directed IRA. In those cases, the IRA itself (not you personally) may need to file Form 990-T and pay any UBIT due from account funds. The custodian and your CPA typically coordinate this filing. So for the typical traded-REIT investor, there is nothing extra to file; for self-directed IRA investors in private or leveraged vehicles, a Form 990-T may be required. Confirm with your custodian and CPA. This is educational information, not tax advice — verify the current rules with your tax advisor.
Is a self-directed IRA more likely to have UBIT issues with real estate?
Yes — a self-directed IRA is more likely to encounter UBIT issues, not because of the IRA itself but because of the kinds of investments it can hold. A standard brokerage IRA typically holds publicly traded securities, including traded REITs, whose dividends are excluded from UBTI, so UBIT rarely arises. A self-directed IRA, by contrast, can invest in alternative assets such as directly held real estate, private real estate funds, and partnerships or LLCs — and these are precisely the structures that can generate UBTI or UDFI. Directly mortgaged real estate creates UDFI; partnership interests can pass through UBTI on a K-1; and leveraged private funds can do both. So the UBIT risk is tied to the investment type a self-directed IRA enables, not to the self-directed structure as such. A self-directed IRA holding only traded REITs would have no more UBIT exposure than a brokerage IRA. Coordinate with your custodian and CPA. This is educational information, not tax advice — verify with your tax advisor.
How do I avoid UBIT surprises in my IRA?
You avoid UBIT surprises by understanding what you actually hold and how its income is characterized before you invest. For ordinary publicly traded REIT shares and REIT funds, there is generally nothing to worry about — the dividends are excluded, and no UBIT arises. The surprises come from less obvious holdings in a self-directed IRA: a real estate partnership or LLC reporting K-1 income that can include UBTI, a leveraged private fund, or directly held real estate financed with a mortgage. Before adding such a vehicle, ask: Will I receive excluded dividends or partnership flow-through income? Does the vehicle use leverage that could create UDFI for the IRA? Will I receive a K-1, and could it report UBTI? Your IRA custodian and CPA can answer these before you invest, so there are no surprises at tax time. For traded-REIT investors, none of this applies. This is educational information, not tax advice — verify the current rules with your tax advisor and custodian.
Does UBIT defeat the purpose of holding REITs in an IRA?
For ordinary publicly traded REITs, no — UBIT does not arise, so it does not undercut the benefit of holding them in an IRA. The reason investors often shelter REITs in an IRA is that REIT dividends are mostly ordinary income, which is tax-inefficient in a taxable account; an IRA shelters that income from annual tax. Because traded REIT dividends are excluded from UBTI, no UBIT offsets that benefit, so the shelter works as intended. UBIT would only undercut the strategy if you held a structure that generates UBTI or UDFI — such as a leveraged private real estate fund or directly mortgaged property in a self-directed IRA — where the UBIT could reduce the after-tax return. So for the typical traded-REIT investor, UBIT is a non-issue and does not defeat the purpose; for self-directed investors in leveraged or partnership vehicles, UBIT is a real factor to weigh. This is educational information, not tax advice — verify the current rules with your tax advisor.
Who pays the UBIT if my IRA owes it?
If an IRA owes UBIT, the tax is paid by the IRA itself, not by you personally. The account's unrelated business taxable income above the annual threshold is taxed, a Form 990-T is filed for the IRA, and the UBIT is paid from the funds inside the account. This is different from how ordinary income tax on an IRA works — normally you pay tax personally only when you take distributions from a traditional IRA. UBIT is an exception that taxes certain income inside the account currently. Because the tax comes out of the IRA's funds, it directly reduces the account's value and its tax-advantaged growth. The custodian and your CPA typically coordinate the filing and payment. For ordinary traded REITs, this situation does not arise, since their dividends are excluded and generate no UBTI. It is relevant mainly for self-directed IRAs holding leveraged or partnership real estate vehicles. This is educational information, not tax advice — verify the current rules with your tax advisor.
Are REITs a tax-efficient way to hold real estate in an IRA?
Yes — publicly traded REITs are often considered a tax-efficient way to gain real estate exposure inside an IRA, specifically because they avoid the UBIT complications that direct or leveraged real estate can create. When you hold a REIT in an IRA, you get exposure to a diversified pool of income-producing real estate, the REIT's distributions are excluded dividends that do not generate UBTI, and the REIT's own leverage stays at the entity level rather than flowing through to you as UDFI. By contrast, buying real estate directly in a self-directed IRA using a mortgage, or investing in a leveraged real estate partnership, can generate UBTI or UDFI and trigger UBIT and a Form 990-T filing. So REITs let you hold leveraged real estate in an IRA without the UBIT friction. That convenience is part of their appeal for retirement accounts. Confirm the specifics of any holding with your custodian and CPA. This is educational information, not tax advice — verify with your tax advisor.
How does Baker 1031 help me understand REITs and UBIT?
We help investors understand, educationally, how UBIT applies to REITs in retirement accounts — what UBIT is, why publicly traded REIT dividends generally avoid it, why a REIT's own leverage does not pass through to shareholders, when certain private or leveraged vehicles can differ, and how to avoid surprises — so you can hold REITs in an IRA with a clear understanding. REIT and non-traded-REIT interests are offered through the broker-dealer, Aurora Securities, Inc. (member FINRA/SIPC), and any recommendation follows a suitability review; non-traded and private REITs typically require accredited or otherwise suitable investors, while publicly traded REITs trade through ordinary brokerage. Baker 1031 does not provide tax or legal advice — this material is educational, not tax advice. Your IRA custodian and CPA confirm the UBIT treatment of your specific holdings, identify whether a private or leveraged vehicle may generate UBTI or UDFI, and handle any Form 990-T filing; verify the current rules with your tax advisor. Yields and returns are never promised, and past performance doesn't guarantee future results.
Glossary
- UBIT
- Unrelated business income tax — tax on certain income in a tax-exempt account.
- UBTI
- Unrelated business taxable income — the income UBIT is calculated on.
- UDFI
- Unrelated debt-financed income — income from account-level leverage, pulled into UBTI.
- Excluded Income
- Passive income (dividends, interest, gains) that does not generate UBTI.
- Tax-Exempt Account
- An account like an IRA that is generally not taxed currently.
- Publicly Traded REIT
- An exchange-listed REIT whose dividends are excluded from UBTI.
- Non-Traded REIT
- An unlisted REIT whose dividends are also generally excluded from UBTI.
- Entity-Level Leverage
- Debt used by the REIT itself, which does not pass through to shareholders.
- Self-Directed IRA
- An IRA that can hold alternative assets like private real estate.
- Real Estate Partnership
- A flow-through vehicle that can pass UBTI or UDFI to an IRA.
- Schedule K-1
- The form reporting partnership flow-through income, which can include UBTI.
- Form 990-T
- The return an IRA files to report and pay UBIT.
- Dividend
- A REIT distribution treated as excluded income for UBIT purposes.
- Custodian
- The institution that holds and administers an IRA's assets.
- Passive Income
- Investment income excluded from UBTI, unlike active-business income.
- Debt-Financed Property
- Property acquired with debt, which can generate UDFI in an IRA.
Sources & References
- U.S. Securities and Exchange Commission. Investor.gov — Real Estate Investment Trusts (REITs)
- Nareit. What's a REIT (Real Estate Investment Trust)?
- Cornell Legal Information Institute. 26 U.S. Code § 857 — Taxation of real estate investment trusts and their beneficiaries
- IRS. About Form 1099-DIV, Dividends and Distributions
Disclosures
This article is published by Baker 1031 Investments, LLC for general educational purposes for accredited investors and is not an offer to sell or a solicitation of an offer to buy any security, nor is it tax, legal, accounting, or investment advice or a recommendation. Any securities offering is made solely through a sponsor’s private placement memorandum (PPM) following a suitability determination. Securities offered through Aurora Securities, Inc. (ASI), member FINRA / SIPC; Baker 1031 Investments is independent of ASI.
Oil & gas mineral and royalty interests and DST programs are speculative, illiquid securities sold only to verified accredited investors and involve substantial risk, including possible loss of principal, commodity-price and production-decline risk, lack of control, and the risk that an intended 1031 exchange fails to qualify for tax deferral. Whether a particular interest qualifies as like-kind real property is a fact-specific legal determination that varies by state and by the terms of the instrument. Tax results depend on your individual circumstances. Consult your own CPA and attorney before acting. Past performance does not guarantee future results.
