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Leveraging Your IRA UDFI Tax Law & Cases

Statutes

IRC § 514(b)(1). UDFI tax is applied to income from “debt financed property” that is subject to “acquisition indebtedness.” Debt financed property is defined as property held to produce income that has acquisition indebtedness.

IRC § 514(b)(1). Additionally, debt incurred after the acquisition of property is acquisition indebtedness if such debt would not have been incurred without the property and if such debt were reasonably foreseen at the time of acquisition.

IRC § 514(9). 401(k) and other employer plans are exempt from UDFI taxes that arise from debt on real property.

IRC § 514 (9)(C)(ii). The tax code specifically exempts plans which are “qualified trusts” under section 401 from the tax code from UDFI tax.

Internal Revenue Manual, Part 2, 7.27.8.4. Unrelated Debt Financed Income, Gain From Sale or Other Disposition of Property, Treasury Regulations 1.514(a)-1(a)(v)(b), IRS Publication 598 (2012). UDFI tax at the time of sale works in a similar fashion to the example above, but the IRA is able to use the capital gain tax rate of 20% on profits subject to UDFI as opposed to being subject to the UBIT rate.

IRS Publication 598 (2012). The tax rates applicable to UBIT tax are the trust tax rates which cap out at a maximum rate of 39.6% at $11,950 of annual income subject to UBIT tax. The UBIT tax should be paid from the IRA’s funds and should not be paid with personal funds of the IRA owner.

Tom W. Anderson

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Tom W. Anderson
President, RITA, and Founder and Vice Chairman / PENSCO Trust Company

Harry Veldkamp

Mat's books is a great reference guide for self-directed IRA investing – Best I’ve seen in 30 years of being in the business.

Harry Veldkamp
CEO, Polycomp Trust Company

Pamela Constantino

Mat's book is an excellent resource for self directed IRA owners and their advisors. It is the first of its kind in our industry. Mat has truly written an “Authoritative Guide” for self directed IRAs.

Pamela Constantino
President, Polycomp Trust Company

Mark J. Kohler

Mat is truly an expert on self directed IRAs, and his book is the one book that every self directed IRA investor should read.

Mark J. Kohler
CPA, Attorney, Author

Richard Davis

I was referred to Matt for help in setting up an IRA owned LLC. Matt and his team did an incredible job completing the work in a few short days. The process was professional, efficient and cost effective. I continue to rely on Matt for guidance running the LLC and related real estate matters. Not only is Matt a good lawyer, he runs a great office. It is easy for me to recommend Matt and his team.

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Christine Farkas
Real Estate Broker & Investor

Jennifer Cayton

Mathew is the legal partner for the majority of my clients. Matthew provides solid legal advice, precise strategic planning, appropriate corporate structure development, and is readily available to consult with his clients on all legal and business manners. Matthew is well respected and has an extremely large network in the successful real estate investor world. Matthew is reliable, professional and an all around great partner to have on your side

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I have retained Mathew Sorensen several times for multiple real estate deals and have been very pleased with his efforts and work product and will continue to use him in the future.

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Real Estate Investor

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My wife and I recently sought Mat's help with estate planning and couldn't have been more satisfied. Mat's professionalism, honesty, creativity and attention to detail is second to none. What impresses me the most about Mat can be summed up as "diverse". Mat's vast knowledge and experience in a plethora of differing areas of the law is astounding. I highly recommend Mat to my clients and friends seeking legal help.

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I have had the opportunity to engage Mat's services on many occasions and have found him to be diligent and reliable. He has always been committed to delivering high-quality work and is very professional. He is well-liked and respected by his peers. He has my most sincere recommendation.

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Mathew Sorensen is a great resource and I use him consistently for real estate law questions. He is a wealth of information and will always give you a great knowledge base. I have been using KKOS for a while now and am very impressed and happy with their services.

Mathew Owens
CPA, Real Estate Investor

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[Mat] is completely devoted to his clients and continually strives to stay abreast of changes and updates in the law. Mat is an unbelievably hard worker and...I don't hesitate to recommend Mat's services to anyone as I know he will take care of them and give them simple, concise, and straightforward solutions to any legal issue they may be facing.

Kenneth P. Child
Chief Legal Officer / Stake Center Locating

K.M

I am a partner in a law firm in Chicago and I have worked with Mat on my personal real estate and business ventures. Mat has given me practical and wise advice which has helped me make profitable decisions. I highly recommend Mat.

K.M.
Attorney & Real Estate Investor

Gary Shumm

Mathew is an excellent attorney, well versed in the Self-Directed IRA market…His ability to distil the complexities of the Self-Directed IRA so that the average person can understand them, and ensure that they don't get "tripped up" is second to none. Anyone interested in this Self-Directed IRA Market would do well to connect with Mathew and learn from the best.

Gary Shumm

Mat is truly an expert on self directed IRAs, and his book is the one book that every self directed IRA investor should read.

Mark J. Kohler
CPA, Attorney, Author / MarkJKohler.com

"A must-read for any self-directed IRA investor."

Kaaren Hall

"Mat's book is an excellent resource for self directed IRA owners and their advisors. It is the first of its kind in our industry.
Mat has truly written an“Authoritative Guide” for self directed IRAs."

Pamela Constantino

"Mat is an excellent attorney, well versed in the Self-Directed IRA market...His ability to distill the complexities of the Self-Directed IRA
so that the average person can understand them, and ensure that they don't get "tripped up" is second to none.

Gary Shumm

"Mat’s book is the most practical and comprehensive self directed IRA guide in our industry. Reading this handbook should be the first step for any alternative asset investor, investment sponsor, or trusted advisor that seeks to become informed about how to maximize the value of IRAs."

J.P. Dahdah

"Mat's books is a great reference guide for self-directed IRA investing – Best I’ve seen in 30 years of being in the business."

Harry Veldkamp

"The Self Directed IRA Handbook by attorney Mat Sorensen is the most comprehensive book ever written about one of the
best investment and retirement savings tools ever created: the Self-Directed IRA."

Tom Anderson
Founder and Retired CEO, PENSCO Trust Company

J.P. Dahdah

Mat’s book is the most practical and comprehensive self directed IRA guide in our industry. Reading this handbook should be the first step for any alternative asset investor, investment sponsor, or trusted advisor that seeks to become informed about how to maximize the value of IRAs.

J.P. Dahdah
CEO, Vantage Self Directed Retirement Plans

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