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I have had a self-directed (check book) IRA for a number of years. I have quite a cash reserve and have considered making a cash purchase of a vacation home in FL that has a very good rental history. I am well aware of all of the prohibited transactions within the self directed IRA.
However, I am getting conflicting info. from two accountants as to the tax treatment of the rental proceeds.
One accountant says that since the average stay for a guest will be 7 days or less, then I am essentially running a hotel according to the IRS, and all rental proceeds will be subject to UBTI. That is a concern since UBTI would confiscate up to 40 percent of the yield.
Another accountant says that regardless of the average length of stay, it is still considered "rent", and is not subject to UBTI.
What is the right answer?
However, I am getting conflicting info. from two accountants as to the tax treatment of the rental proceeds.
One accountant says that since the average stay for a guest will be 7 days or less, then I am essentially running a hotel according to the IRS, and all rental proceeds will be subject to UBTI. That is a concern since UBTI would confiscate up to 40 percent of the yield.
Another accountant says that regardless of the average length of stay, it is still considered "rent", and is not subject to UBTI.
What is the right answer?
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Tax Professional Answers
John Stancil
Renting the property on short term rental, such as you have proposed, is treated as income from a hotel or boarding house. Therefore, the income is UBTI. Basically, it is considered a business and not a rental activity.
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502 weeks ago
John Stancil
Renting the property on short term rental, such as you have proposed, is treated as income from a hotel or boarding house. Therefore, the income is UBTI. Basically, it is considered a business and not a rental activity.
Leave a Comment
502 weeks ago