Tax Treatment of Exempt Organization Real Estate Income: Calculating UBTI and UDFI on Rental Income

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

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Conducted on Thursday, July 26, 2018

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Course Materials

This course will provide tax professionals and advisers to exempt organizations with a practical guide to the planning opportunities, tax risks and reporting obligations of exempt organizations investing in real estate assets. The panel will outline when rental and sale income is exempt and when not, discuss the impact of debt financing on tax and reporting obligations, and provide examples of how to calculate and apportion proceeds and income between exempt purpose and unrelated business income.

Description

While exempt organizations are generally not subject to income tax, many nonprofits receive unrelated business income (UBTI) that is subject to tax (UBIT). For those organizations owning real property, navigating the UBTI rules for both rental income and sale gain can be a significant challenge and concern.

Investment in real estate by an exempt organization in a joint venture or other partnership with a taxable entity can complicate the tax treatment of income or gain from the real property. The Code provides structures to exempt from tax specific income that it would otherwise treat as UBTI. However, tax advisers must have a thorough grasp of the rules to avoid costly consequences from a reclassification of income.

Listen as our panel of experienced nonprofit tax advisers provides a deep dive into the rules and reporting requirements governing UBTI for exempt organizations.

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Outline

  1. Income subject to classification as UBTI under Section 512
  2. Tax treatment of rental income
  3. Income from real property transactions where the asset is not considered part of the organization’s exempt purpose or mission
  4. Reporting challenges and examples

Benefits

The panel will discuss these and other relevant topics:

  • What are the exceptions to income from real estate that would otherwise be considered UBTI under Section 512? 
  • Tax treatments of real estate owned in joint ventures between exempt organizations and for-profit companies or syndicates
  • Allocating sale gain in instances where some but not all proceeds are considered tax exempt

Faculty

Fortsch, Zack
Zack Fortsch
Tax Partner
RSM US

Mr. Fortsch is a lead specialist with regards to tax-exempt issues for the firm. From a national perspective , he...  |  Read More

Luksis, John
John R. Luksis
Senior Manager
RSM US

Mr. Luksis is a tax advisor with the Firms's national real estate practice. He provides comprehensive tax services...  |  Read More

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