January 5 2015

Taxation rate applied to profits for financed properties

Dmitriy Fomichenko Assets, Investing

What determines the taxation rate applied to profits for financed properties?

The Solo 401k is exempt from the UBTI related to buying property with financing
An IRA LLC, however, has a taxation rate determined by the amount of leverage you're using

For example, if 80% is leveraged and 20% cash is put into the property, then 80% of the income/gains will be taxable.

Consult with your CPA to fully understand all tax consequences (e.g. calculating UBTI tax, preparing the relevant forms to report).