IRA Financial Group Introduces Self Directed IRA UBIT Minimization Strategy for Active Business Investments Using Retirement Funds

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IRA Financial Group’s Customized Self-Directed IRA LLC Operating Agreement to contain language to minimize impact of UBIT on business investments

Self-Directed IRA UBIT Minimization Strategy

With IRA Financial Group’s Self Directed IRA UBIT minimization strategy, our retirement investors are able to invest in active trade or businesses with friends and colleagues and not have to pay any UBTI tax on the income or gains generated

IRA Financial Group, the leading provider of “checkbook control” self directed IRA LLC solutions announces the introduction of its Self Directed IRA UBIT minimization strategy for active business investments. According to Adam Bergman, a tax attorney with the IRA Financial Group, the unrelated business taxable income (“UBIT or “UBIT”) would apply and tax income generated by a charity or retirement account investment into an active trade or business owned via a passthrough entity, such as a limited liability company or partnership. Accordingly, each time a retirement account, such as self-directed IRA or Solo 401K plan invest in an active trade or business through a passthrough entity, the income or profits allocated to the retirement income would be subject to tax under the IRA UBTI rules. In addition, the tax rate triggered by the UBTI rules is generally about 35%, which makes minimizing the impact of the UBTI crucial when structuring retirement account investments.

With IRA Financial Group’s Self Directed IRA UBIT minimization strategy, the tax attorneys of the IRA Financial Group have developed specific language to be inserted in the operating company’s LLC operating agreement which would require the operating company to pay any tax due on an allocation of income or gains to the retirement account. “Through our specially drafted IRA LLC Operating Agreement, our retirement investors are able to benefit from receiving tax distributions from the operating company that will help cover any UBTI tax that would be applicable, “ stated Mr. Bergman.

The purpose of the UBTI or UBIT rules is to treat tax-exempt entities, such as charities, IRAs and 401(k)s as a for-profit business when they engage in active business activities or use leverage. In the case of an IRA or 401(k) plan, a transaction would not trigger the UBTI or UBIT rules if the transaction is deemed not to be considered a trade or business that is regularly carried on. This typically involves passive types of activities that generate capital gains, interest, rental income, royalties, and dividends. The passive income exemptions to the UBTI or UBIT rules are listed in Internal Revenue Code Section 512. However, if the tax-exempt organization engages in an active trade or business, such as a restaurant, store, or manufacturing business, the IRS will tax the income from the business since the activity is an active trade or business that is regularly carried on.

“With IRA Financial Group’s Self Directed IRA UBIT minimization strategy, our retirement investors are able to invest in active trade or businesses with friends and colleagues and not have to pay any UBTI tax on the income or gains generated, “ stated Mr. Bergman.
The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.

IRA Financial Group is the country’s leading provider of “checkbook control Self Directed IRA LLC and Solo 401(k) Plans.. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.

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Jaclyn Baily
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