Yes UBIT Applies to Margin Trading Court Case

The following court case confirms that unrelated business income tax (UBIT) applies to stock margin trading performed in an IRA or solo 401k plan: Bartels Trust v. U.S. (106 AFTR 2d 2010-6004 9/07/2010)

The Court of Appeals for the Federal Circuit held that income from securities purchased on margin is subject to unrelated business income tax (UBIT) even though the exempt entity was not engaged in a trade or business.

On another note, UBIT will also be triggered by investing Solo 401k plan funds in a trade or business through a partnership or LLC.  However, UDFI  does not apply to solo 401k funds that are invested in debt financed real estate where the sole owner of the property is the solo 401k.

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>


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