If the enterprise is a pass-through entity (a partnership or a limited liability company) which produces or sells goods or provides services, the IRA's share of the enterprise's ongoing net income likely will be unrelated business taxable income. An IRA is required to pay income tax on UBTI at the trust income tax rate. Also, if the business is a pass-through entity which acquires any assets through loans or on margin, a portion of the IRA's share of the income may constitute UBTI.

The IRA generally will not have UBTI on the sale of its equity interest in the pass-through entity (except to the extent that interest was acquired through debt which was still outstanding within twelve months of the sale).

Structuring the enterprise as a C corporation can avoid UBTI, although the enterprise then will be subject to income tax in accordance with applicable corporate taxation rules.