Unrelated Business Income Tax

UBIT can be a confusing topic. The guys who wrote this part of the tax code did not write it for the layman. Here is a brief rundown on why you may see different words and acronyms floating around when researching this topic:

UBTI – Stands for Unrelated Business Taxable Income. This is the taxable income that taxes must be paid on.

UDFI – Stands for Unrelated Debt Financed Income. This is the taxable income that taxes must be paid on when a tax exempt entity earns profit from ownership from an asset that is leveraged with debt. The most common occurance of this would be the ownership of a piece of real estate on which there exists mortgage debt.

UBIT – Stands for Unrelated Business Income Tax. This is the actual tax that is due on the taxable incomes listed above.

Stay tuned; more posts to come…