Consider the following scenario: You’ve carefully selected private equity investments for your IRA, excited about the potential for tax-advantaged growth. The investments perform well in the first year, generating substantial returns. Then, unexpectedly, you receive a tax notice. Your IRA owes significant unrelated business income tax, drastically reducing your returns. Despite the investment meeting performance targets, your after-tax returns fall short of projections. You now face the difficult decision of liquidating the investment early or accepting diminished returns that weren’t factored into your initial investment thesis.

This cautionary tale illustrates why proper structuring matters. For IRA investors, private equity investments offer attractive opportunities for portfolio diversification and growth. However, without proper attention to tax structures, these investments can trigger unexpected tax liabilities that significantly erode returns. This is especially c