Do investors investing through exempt entities (i.e. charities, endowments, IRAs) need to worry about Unrelated Business Taxable Income (UBTI)?
The majority of investments do not rise the level of being a trade or business and therefore would not have UBTI. Typically, the only income produced by these funds is interest from convertible promissory notes or capital gains from the sale of stock. These types of investment income are not considered UBTI. Occasionally, there are funds that produce ordinary business income which may subject the investor to UBTI. IRS Publication 598 may be provided as a reference, but they should consult their tax advisor for additional guidance.