I setup a solo-401k, and have made investments from the solo-401k.
From one of these investments, I received a K-1 form for my solo 401k plan's investment in a limited partnership.
The K-1:
does not show any UBIT on it.
does use the EIN of the solo-401k trust.
does use the name of the trust as the investor.
* Does this k-1 need to be reported/filed? I'm thinking it does not, as there is no tax due.
* Should Box I2 on the K-1 be checked? "I2 If this partner is a retirement plan (IRA/SEP/Keogh/etc.), check here"
** It is not checked on the K-1, and I am wondering if this is something that should be corrected to prevent confusion with the IRS.
I was wondering if I should contact the sponsor (to not get a K-1 in the future), or if this is "normal" to sometimes get K-1's and sometimes not, and only file if UBIT is shown.
ANSWERS:
1) As a general matter, you need to keep the K-1 in the records of the Solo 401k.
2) You need to confirm that the K-1 is issued under the name of the Solo 401k and EIN of the Solo 401k - if not, please instruct the investment provider (e.g. general partner) to provide you and the IRS an amended/corrected version of the K-1. At the same time, the investment provider can check Box I2 to indicate that the K-1 is being issue to a retirement plan - this may be helpful to let the IRS know not to look for this income to be reported on your personal tax return or the tax return of your business.
3) Your Solo 401k should get a K-1 every year for which it holds an investment in the partnership since the partnership will need to file taxes every year - if you don't receive one, you should contact the investment provider to obtain it.
4) Even if the K-1 does not report any Unrelated business taxable income, you (in consultation with your tax advisor) still need to make your own independent determination and verification whether any UBIT is owed. See more HERE.
Also, unrelated business income tax (UBIT) only applies to a retirement account like an IRA LLC and solo 401k plan if the retirement account invested in a business that offers goods or services.