In addition to holding publicly traded assets, your client's Equity Institutional account may also purchase certain entity investments. To direct an entity investment within an Equity Institutional account, please provide all the necessary documents on the Entity Direction of Investment Form.
The following Entity FAQ will help you understand the specifics of processing entity investments within your Equity Institutional account.
What types of entity investments can be held within an Equity Institutional account?
Types of private entity investments that Equity Institutional will process include (but are not limited to) stock of C-corporations, limited partnerships, limited liability companies, land trusts, joint ventures, and unit investment trusts.
Are there any types of IRA investments that Equity Institutional will not process?
Types of private entity investments that may not be administratively feasible for Equity Institutional to process include (but are not limited to) single-member entities, general partnerships, stock of S-corporations and certain foreign-based investment entities.
Can an Equity Institutional client invest in an entity that he/she or his/her family member owns?
If your client's IRA or Qualified Plan invests in an entity that he or she, or certain family members own or control (whether controlled individually or as an officer of a corporate general partner, managing member, etc.), the transaction could possibly be a prohibited transaction under Internal Revenue Code Section 4975. Equity Trust does not determine whether a proposed transaction is prohibited, but it may not process an investment that has characteristics typical of a prohibited transaction.
What is a prohibited transaction?
Internal Revenue Code Section 4975 defines a prohibited transaction as a transaction between a plan (your client's account) and a disqualified person. In general, “disqualified persons” are defined to be the Account Holder, other fiduciaries, certain family members (lineal descendents and spouses of lineal descendents) and businesses under the Account Holder’s (or disqualified person’s) control. Please review the code for specific information and definitions. Other useful resources are Publication 560 and 590.
What is Unrelated Business Taxable Income?
Limited partnerships, limited liability companies and other entities that carry on an unrelated business or borrow funds to finance the acquisition of property may generate Unrelated Business Taxable Income (UBTI). UBTI is generally reported on Schedule K-1 issued by the entity. If the UBTI attributable to your client's account exceeds $1,000 for any taxable year, IRS Form 990-T must be filed along with the appropriate amount of tax, payable from the account. Equity Institutional does not monitor UBTI and does not prepare Form 990-T except as a supplemental service for an additional fee. If the tax is applicable, you must prepare, or have prepared, Form 990-T and forward to Equity along with written authorization to pay the tax from your client's account. If your client is required to file Form 990-T, he or she must apply for and utilize an Employer Identification Number (“EIN”). Equity Trust’s EIN or your client's Social Security number cannot be used. For more information on UBTI, please refer to IRS Publication 598 and/or consult with a tax advisor.
How are capital calls from a limited partnership or limited liability company handled?
Equity Institutional must receive written authorization to send a capital call from your client's account. Please provide Equity Trust with a copy of the capital call assessment along with a signed letter of instruction to send the amount of the capital call from the Equity Institutional account to the entity.
Will Equity Institutional assist with setting up a limited partnership, limited liability company or other entity?
No. As a passive custodian, this is not a service that Equity Institutional provides. Your client will need to rely on an attorney or tax advisor with respect to the entity’s formation and any other legal or tax advice.
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