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Top 10 Self Directed IRA/401k Mistakes - #5 IRA owner loans money to a third party with equity kicker in order to avoid UBTI

Loaning money to an independent, third party is acceptable and the receipt of interest income is generally considered to be passive and therefore not subject to UBTI. However, adding the equity kicker component to the loan is likely to be viewed as nothing more than a disguised equity interest in the business. This would most likely not avoid any UBTI on the IRA.

To learn more about self directed IRAs go to:

www.nafep.com

www.iracentral.com


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