While the UBIT rules are complex and depend on the facts and circumstances, short term rental income earned from real estate owned by a IRA LLC will generally be subject to UBIT if such income constitutes business income.
While income earned from leasing real estate is typically considered non-business rental income, the IRS has identified certain scenarios where real estate rental income is treated as business income.
- The average period of customer use is 7 days or less.
- The average period of customer use is 30 days or less and significant personal services are provided with the rental.
See Treas. Reg. § 1.469- 1T(e)(3)(ii)
As such, if the IRA LLC owned real estate is rented via Airbnb on a short-term basis as described in one of the above scenarios, the income would generally be subject to UBIT.