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Plan trusts and VEBAs invest in funds--typically organized as partnerships or limited liability companies (LLCs)--that generate UBTI. The trusts and VEBAs are tax-exempt entities under Sections 501(a) and 501(c)(9) of the IRC, and, thus, the federal government generally does not tax them on income unless they generate UBTI.
752 allocation of liability on K-1 Nonrecourse liability 21,123 21,123 Qualified nonrecourse liability 1,727 1,727 1,727 Table 3 The Blackstone Group LP Unrelated business taxable income (UBTI) K-1 line Description Amount 20V1 UBTI--Ordinary income 297 20V2 UBTI--Net rental income 163 20V3 UBTI--Dividend income 15 20V4 UBTI--Short-term capital gain 60 20V5 UBTI--Long-term capital gain 9 20V6 UBTI--Unrecaptured Sec.
Nonprofits are generally subject to tax with respect to their UBTI. An activity is considered an unrelated business, and thus subject to UBTI, if it meets the following requirements: It is a trade or business, it is regularly carried on, and it is not substantially related to furthering the exempt purpose of the organization.
In a notice of deficiency, the IRS determined that nonmember sales were not entered into for profit, so the losses could not offset investment income and the investment income was UBTI. The Service determined deficiencies relating to 2010,2011, and 2012, and assessed accuracy-related penalties under Sec.
Several of the structures also transform UBTI to other forms of income, and all provide daily liquidity.
Operating income from hotels is generally UBTI. In contrast, gain from the sale of a hotel may not be subject to UBIT (assuming that there is no debt financing associated with the hotel).
The IRS released a technical advice memorandum finding that a fund maintained by an employer to provide death benefits to retirees was a welfare benefit fund described in IRC Section 419(e) that could be permissibly aggregated with other funds to reduce the employer's unrelated business taxable income (UBTI).
Additionally, this mentioned income may be characterised as unrelated business taxable income (UBTI) to the company's tax-exempt investors based on a facts and circumstances analysis by the investors and while it will pay income taxes due on this income generated by these legacy securities, such amount will not be material to the company.
As a side note, it is worth mentioning that tax-exempt partners are only generally subject to tax on the Unrelated Business Taxable Income (UBTI) portion of the partnership income.