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

Identifying UBTI and UDFI Generating Assets in Exempt Trusts, New Aggregation Rules

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Wednesday, July 11, 2018

Recorded event now available

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Course Materials

This course will give trust tax advisers and fiduciaries a thorough guide to recognizing and reporting unrelated business taxable income (UBTI) generated by assets held in trusts and estates, including inherited retirement plans. The webinar will focus on the standards and guidelines for determining whether income derived from assets in a qualified plan is UBTI, and thus subject to tax, and will provide detailed guidance into Form 990-T filing requirements for fiduciaries.

Description

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.

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Outline

  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

Benefits

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?

Faculty

Higgins, Garrett
Garrett M. Higgins, CPA
Partner
PKF O'Connor Davies

Mr. Higgins is Partner-in-Charge of the Exempt Organization Tax and Advisory Services Group of his firm. He provides...  |  Read More

Modelson, Melissa
Melissa Modelson, CPA
Tax Manager
PKF O’Connor Davies

Ms. Modelson is a manager in the Exempt Organization Tax and Advisory Service practice of PKF O’Connor Davies,...  |  Read More

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