Self-directed IRAs can owe unrelated business income tax (UBIT) on certain income, called unrelated business taxable income (UBTI). This can apply when an IRA invests in an operating business or in property that uses debt (leverage).
Dividends from real estate investment trusts (REITs) are generally not treated as UBTI, even when the REIT itself uses debt. Arrived’s individual property offerings and the Single Family Residential Fund and Seattle City Fund are structured to be taxed as REITs.
There are exceptions. For example, if your IRA borrows money to purchase shares, income from those shares may be treated as UBTI. Tax rules depend on your individual circumstances and can change.
This article is for general information only and is not tax advice. Consult a tax professional about your situation.