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Private Equity FAQs

Which accounts are eligible?

Any account offered by NDTCO can invest in Private Equity.  

Can NDTCO help me invest?

As the IRA holder, you are responsible for performing due diligence on your IRA’s investments. Neither the IRS nor NDTCO researches or endorses the investments, or investment providers, involved in your IRA’s transactions. A competent professional in the legal, financial advice or accounting fields can also be engaged if you need additional help deciding if the investment being considered is legitimate, meets your risk tolerance, and is right for your investment goals.  

What about Capital Calls & Additional Funding?

Required forms for an additional funding are:  

  • Funding Instructions – Check, ACH or wire instructions from the entity  
  • Capital Call Letter – Entity always supplies this document OR Subscription Agreement – For additional funding, a new purchase or subscription agreement may be required by the entity. 
  • If the entity is a Closely Held LLC that is managed by the account holder, the capital call letter can be written and signed by the account holder/LLC manager.  

Please note that additional funding depends on whether or not the operating agreement of the company allows for it.  

Are there Fair Market Valuation requirements?

Per IRS regulations, each retirement account must be valued annually.  Once per year, NDTCO accounts that hold private equity must complete a Fair Market Valuation (FMV).

 Supporting documentation from a qualified 3rd party is required for the valuation to be processed. 3rd party documentation may include a valuation letter or annual shareholder statement from the investment company, a CPA, an attorney, or a public document.  

Supporting documents not accepted: Schedule K-1s (which report annual earnings or losses but not fair market values), documents older than 6 months from creation date, recorded phone conversations, or e-mails do not constitute valid supporting documentation. 

Failure to provide an annual valuation may result in the taxable distribution of your asset. Accounts that have shown no activity, including the valuation, will not be held by NDTCO because we cannot meet the IRS requirement to annually update the value of your IRA and file an accurate IRS Form 5498 for your account.  

To complete a Fair Market Valuation Form, please:  

  • On the Overview page, find the appropriate asset and select Take Action in the right-hand column, and then choose Valuate.    
  • Provide any requested information and upload your supporting documentation.   
  • Agree to the Terms & Conditions and click Submit. Done!   

What is UBIT?

Unrelated Business Income Tax (UBIT) applies to debt financed property in IRAs and also applies to operating income received from companies owned by IRAs and qualified plans. Typically, the debt financed income is taxable under UBIT rules for the percentage of property that is debt-financed.  See here for more information on UDFI, UBTI, and UBIT.   

Does UBIT apply?

Earnings from certain investments may be subject to Unrelated Business Income Tax or UBIT. The IRA pays this tax, not you personally. Consult with your tax professional to determine if UBIT is owed. If so, you would file a form 990-T with the IRS for your IRA. 

What is a prohibited transaction?

A prohibited transaction is any transaction that takes place between an IRA and any disqualified person or entity. The following actions are considered prohibited transactions and could result in the distribution of this asset from your plan. Prohibited transactions apply to all disqualified persons to your plan.  

  • Engaging in a private equity transaction between your account and a disqualified person  
  • Yield a commission/fee for the purchase, sale, or exchange of assets  
  • Cover account expenses with personal, non-account funds  
  • Use of your IRA’s assets as collateral for a personal loan  
  • Use of your IRA’s assets to guarantee credit for a loan  
  • Receive dividend or distribution payments directly instead of having them go to the IRA 

While we can share IRS rules with you, NDTCO does not give tax, legal or investment advice so you may be referred to your financial or legal representative for further details or a possible solution. 

All expenses for the investment are the IRA’s responsibility. Never pay any bills with personal funds. Such payments may be considered prohibited transactions, which could jeopardize the tax-advantaged status of your IRA.