Tax Treatment of Exempt Organization Real Estate Income: Calculating UBTI and UDFI on Rental Income

While exempt organizations are generally not subject to income tax, many nonprofits receive unrelated business taxable income (UBTI) subject to tax (UBIT). Navigating the UBTI rules for rental income and sale gain for organizations owning real property can be a significant challenge and concern.

Investment in real estate by an exempt organization in a joint venture or other partnership with a taxable entity can complicate the tax treatment of income or gain from the real property. The Code provides structures to exempt from tax-specific income that it would otherwise treat as UBTI. However, tax advisers must have a thorough grasp of the rules to avoid costly consequences from a reclassification of income.

Listen as our panel of experienced nonprofit tax advisers provides a deep dive into the rules and reporting requirements governing UBTI for exempt organizations.

1. Income subject to classification as UBTI under Section 512
2. Tax treatment of rental income
3. Income from real property transactions where the asset is not considered part of the organization's exempt purpose or mission
4. Reporting challenges and examples

The panel will discuss these and other relevant topics:

• What are the exceptions to income from real estate that would otherwise be considered UBTI under Section 512?
• Tax treatments of real estate owned in joint ventures between exempt organizations and for-profit companies or syndicates
• Allocating sale gain in instances where some but not all proceeds are considered tax exempt

Learning Objectives

After completing this course, you will be able to:

• Identify structures in ownership of real property by exempt organizations that can bypass UBTI treatment of rental income
• Discern how to allocate rental income and/or gain on the sale of real property when a portion of the income is subject to UBIT
• Recognize exceptions in UBTI treatment of rental income and sale gain on disposition of real property assets by an exempt organization

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, preparing complex tax forms and schedules; supervisory authority over other preparers/accountants. Specific knowledge and understanding of UBTI and UBIT for Form 990 T.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).