Unrelated Business Taxable Income
Unrelated Business Taxable Income (UBTI) is usually generated by a tax-exemption that is related to its main function as being tax free. However, income not related to the main function of the entity may be taxable.

UBTI in an individual retirement account (IRA) is an alternative investment that can produce UBTI of $1,000 or more and may be taxable to the IRA owner. Examples of when UBTI is usually generated include when businesses that are owned by the IRA and when the IRA invests in a limited partnership.

Life Insurance
Life insurance for employees covered under a qualified plan can be purchased and owned by the plan with tax-deductible employer contributions. A qualified plan that is overfunded or close to full funding, may wish to add incident life insurance coverage to allow for higher deductible contributions to the plan.

Life insurance within a qualified plan can be used to help owners and other highly compensated participants to meet substantial estate taxes.

Life insurance may be used as a secure means of funding an employer-sponsored retirement plan.

Advantages:
Tax benefits.
Safe investment.
Provides predictable plan costs for the employer.
"Pure insurance" component of a qualified plan (death proceeds minus cash values) is free from income tax.

Disadvantages:
Low rates of return compared to other investments.
Policy expenses and commissions may be greater than other investments.

Introduction

Related Articles
  1. Taxes

    Don't Miss These Insurance-Related Tax Deductions

    Knowing the tax deductions you're entitled to can make or break your bank account. Do you know about all these insurance-related deductions?
  2. Financial Advisor

    Why the Wealthy Should Buy Lots of Life Insurance

    Wealthy clients have an enviable problem — managing, preserving and growing wealth. Properly structured life insurance can help with these goals.
  3. Retirement

    Top Tips For Maxing Out Your Retirement Account

    If you are behind in your retirement plan contributions for the year, this is the time to figure out how to catch up.
  4. Financial Advisor

    Top Tips for Retirement Account Withdrawals

    Top things you need to know when it comes to managing the complex task of retirement account withdrawals.
  5. Retirement

    House Your Retirement With Self-Directed Real Estate IRAs

    Investors are now able to invest directly in real property, mortgages and other assets.
  6. Insurance

    Life Insurance

    Life insurance is an important component of basic financial planning. Find out how life insurance works and how insurance companies are able to profit through providing financial security to ...
  7. Retirement

    6 Ways to Reduce Taxes in Retirement

    Use these 6 tips before and after you retire to reduce taxes for yourself and your loved ones.
Frequently Asked Questions
  1. How did the ABX index behave during the 2008 subprime mortgage crisis?

    Read about the disastrous performance of the various ABX indexes in the subprime mortgage crisis of 2008 during the middle ...
  2. How did moral hazard contribute to the 2008 financial crisis?

    Learn about moral hazard, how it can affect outcomes and how it contributed to the conditions that led to the 2008 financial ...
  3. Which mutual funds made money in 2008?

    Read about the only mutual fund that turned a profit in 2008. Learn about risk-averse investment strategies and the financial ...
  4. Were Collateralized Debt Obligations (CDO) Responsible for the 2008 Financial Crisis?

    Collateralized debt obligations are exotic financial instruments that can be difficult to understand, Learn the role they ...
Trading Center