Preferred Interests, IRAs, And UBI
Debt-financed income is UBI to an IRA. However, what if the leverage is obtained by using a preferred interest? For example, an unrelated investor might partner with my IRA, receiving a preferred interest that pays the first 10% return on invested capital to them, with the excess going to my IRA. Preferred interests are treated as equity, not debt, on the books of the partnership. Is this a kosher way to avoid UBI?
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