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$32 of UBTI in my Solo 401k

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  • $32 of UBTI in my Solo 401k

    One of the debt funds in my solo 401k spit out $32 in UBTI this year. UBTI is not captured on the individual return. You have to file as a tax exempt organization through form 990T and efile with special IRS approved software. On the IRS website it says the filing threshold is $1000, and the tax would only be about $3, so I assume I am off the hook. I hope that California will not come after me either for $3 (8.84%), though I suppose anything is possible.

    Do any of the experts here think I will have a problem if I ignore the $32 in UBTI?
    Last edited by Lithium; 04-07-2022, 05:32 PM.

  • #2
    If it’s an investment in your 401k, why would any of the dividends, interest, capital gains, etc be taxable currently? I guess I don’t understand how it would matter if it’s from a debt fund, but interested to hear from more knowledgeable folks (calling out Spiritrider here).


    • #3
      UBTI and UDFI are types of taxable income on tax-exempt entities and tax-advantaged retirement accounts.

      For an individual these only apply to alternative invests such as certain debt instruments and real estate in self-directed retirement accounts.


      • #4
        This is a real estate debt fund. I was under the impression it would not generate UBTI when I invested in it, as the sponsors purportedly do not use leverage, so this was an unpleasant surprise.


        • #5
          My understanding is that UBIT applies to IRAs but not 401k’s. No guesses about a California grab, but I think it’s safe to say you can ignore it.
          Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


          • #6
            The UBTI and UDFI rules for 401k plans reduce but do not eliminate UBIT for certain circumstances.