Form 990-T Filing Requirements: UBTI Reporting for Exempt Trusts, IRAs and Other Qualified Plans

While the default treatment of exempt trusts, including IRAs and other qualified retirement plans, is to defer income tax on any accumulation in asset value until distributed, certain types of income and transactions within an ordinarily exempt or tax-deferred plan are subject to current income tax. An IRA or retirement account that receives UBTI over a specified threshold is required to report the income and pay unrelated business income tax on the UBTI.

The most apparent circumstances where UBTI would apply to a qualified plan are in self-directed IRAs owning real estate or closely held business assets, particularly where debt financing is involved. However, assets such as master limited partnerships (MLPs), which are traded on a public exchange, can generate UBTI and result in unforeseen tax filing and payment obligations.

The recent tax reform law provides an additional twist to the already complicated UBTI rules. Any exempt trust, qualified plan or exempt corporation with more than one UBTI-generating asset must segregate the UBTI calculations before aggregating total UBIT due and reportable on Form 990-T.

Tax advisers need to know the intricate UBTI rules related to exempt trusts. Failure to recognize and account for UBTI in a tax-deferred plan can lead to a host of adverse tax consequences, including tax, penalties and disallowed contributions.

Listen as our experienced panel provides practical guidance on the tax consequences of UBTI in exempt trusts, offering detailed instructions on identifying UBTI-generating assets and discussing filing and payment requirements arising from UBTI in qualified plans.

1. UBTI and UBIT rules overview
2. Identifying UBTI in trusts and estates
   1. Assets that commonly generate UBTI
   2. IRA trusts that hold UBTI assets
   3. Special trust rules
3. Form 990-T filing thresholds
4. UBTI calculations and schedules
   1. Tax computation
   2. Allocation of expense deductions
   3. Rent income (Schedule C)
   4. Unrelated debt-financed income (Schedule E)
   5. Exploited activities (Schedule I)
   6. Advertising income (Schedule J)
   7. Other schedules
5. New segregation rules for multiple UBTI-generated assets
6. UBTI in IRAs and qualified plans

The panel will discuss these and other relevant topics:

• What assets and structures will generate UBTI?
• How do MLPs held by a trust or qualified plan UBTI reporting and payment requirements?
• What are the estimated payment rules for trusts and estates with unrelated business income tax liabilities?
• Unrelated debt-financed income (UDFI) rules and treatment of qualified plan assets financed by debt
• What impact will the new segregation rules for separate UBTI-generating assets have on trusts?

Learning Objectives

After completing this course, you will be able to:

• Identify assets within IRA trusts and other qualified plans that generate UBTI
• Detail the impact of debt financing in generating UDFI/UBTI
• Recognize inclusions, exclusions and thresholds for reporting UBTI on Form 990T
• Discern the impact of the new segregation rules for separate UBTI generating assets contained in tax reform law

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, preparing complex tax forms and schedules; supervisory authority over other preparers/accountants. Specific knowledge and understanding of UBTI and UBIT for Form 990 T.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).