JustAnswer > Tax

Tax

Ask a Tax Question, Get an Answer ASAP!

Have your own Tax question?

11 Tax Professionals are Online Now

characters left:

Not a Tax Question?

Question

Hello I would like know if some as really as knowledge about self directed IRA and non recourse morgage

Here is the question I have land valued at 275k I need to pay off a builders loan that they took from a bank and build a house on My IRA land There loan was 350k If I go out and get a non recourse note for 350k to pay off builder then in 6 months I sell the whole package to a family because they love the house and the agreed purchase price is 700k how much tax would I owe since I leverged this with a non recourse note Do I owe UBIF taws or UBIT taxes what is the tax owed and how do you get to a figure.

Submitted: 187 days and 21 hours ago.

Category: Tax

Value: $9

Status: CLOSED

Country/State/Province of question: new York

Posted by Bill 187 days and 21 hours ago.

Answer

If you obtain a nonrecourse loan then the leveraged portion of the net income generated from the property would be considered UBTI . The UBTI would be the leveraged portion of net income including the net profit made on the sale of the property. Any UBTI income in excess of $1,000 would be taxed at trust tax rates and the taxes would have to be paid from the IRA.

This link provides a sample calculation - http://newdirectionira.com/blog/bid/20712/Unrelated-Business-Income-Tax-UBIT-AKA-UBTI

See page 16 for tax rate schedule for trusts - http://www.irs.gov/pub/irs-pdf/i990t.pdf

187 days and 21 hours ago.

Reply

Hello I need real close numbers again land worth 275k non recourse loan 350k sale nets 660k what is owed just a rough idea

Posted by Bill 187 days and 20 hours ago.

Info Request

What would be your cost basis on the property?

187 days and 20 hours ago.

Reply

are you saying what I have into the land with expenses about 280k

Accepted Answer

Well if the total cost of the property was $630,000 {which includes the nonrecourse loan ($280k + $350k)] and you net $660,000 from the sale then your profit would be $30,000 and the UBTI amount would be $16,666 (350/630 x $30,000). The tax on $16,666 of UBTI would be $4,460.

Expert:	Bill
Pos. Feedback:	99.6 %
Accepts:	1789
Answered:	9/11/2009

Enrolled Agent

EA, QPA, CHFC, CEBS, CLU - 30 years experience providing financial advice

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Tax

Ask a Tax Question, Get an Answer ASAP!

Have your own Tax question?

Related Tax Topics:

Question

Optional Information

Country/State/Province of question: new York

Answer

Reply

Hello I need real close numbers again land worth 275k non recourse loan 350k sale nets 660k what is owed just a rough idea

Info Request

What would be your cost basis on the property?

Reply

are you saying what I have into the land with expenses about 280k

Accepted Answer

Well if the total cost of the property was $630,000 {which includes the nonrecourse loan ($280k + $350k)] and you net $660,000 from the sale then your profit would be $30,000 and the UBTI amount would be $16,666 (350/630 x $30,000). The tax on $16,666 of UBTI would be $4,460.

Tax

Ask a Tax Question, Get an Answer ASAP!

Have your own Tax question?

Related Tax Topics:

Question

Optional Information

Country/State/Province of question: new York

Answer

Reply

Hello I need real close numbers again land worth 275k non recourse loan 350k sale nets 660k what is owed just a rough idea

Info Request

What would be your cost basis on the property?

Reply

are you saying what I have into the land with expenses about 280k

Accepted Answer

Well if the total cost of the property was $630,000 {which includes the nonrecourse loan ($280k + $350k)] and you net $660,000 from the sale then your profit would be $30,000 and the UBTI amount would be $16,666 (350/630 x $30,000). The tax on $16,666 of UBTI would be $4,460.

Related Tax Questions