UBIT in An IRA
IRAs generally are subject to tax on income that is taxable to most U.S. tax-exempt entities under 26 U.S.C. §511. 26 U.S.C. §408 contains many of the rules governing the treatment of IRAs. §408(e)(1) states: "Any individual retirement account is exempt from taxation under this subtitle unless such account has ceased to be an individual retirementaccount by reason of paragraph (2) or (3). Notwithstanding the preceding sentence, any such account is subject to the taxes imposed by section 511(relating to imposition of tax on unrelated business income of charitable, etc. organizations)."
In addition, the IRS unequivocally confirms this in the first few paragraphs of Chapter 1 of the November 2007 revision of Publication 598 that IRAs are "subject to the tax on unrelated business income."
Read more about this topic: Unrelated Business Income Tax