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What is Unrelated Business Income Tax?

April 26, 2017Business unrelated

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What is Unrelated Business Income Tax?

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UBIT comes in two forms. Unrelated Business Income Tax (UBIT) and Unrelated Debt Financed Income Tax (UDFI). UBIT applies to IRAs invested in entities that do not pay taxes (such as many LLCs) that are an operating entity of a business that produces in excess of $1,000 per year in income. UDFI relates to an individual retirement account that is debt financed provided that the net gain is more than $1,000 in a year.