Here is clear distinction between an IRA and a 401(k). If an IRA leverages (borrows) funds to purchase an investment, there will be taxes (UDFI) due on the profit with the investment which is attributable to leveraged funds. With the 401(k) purchasing real estate (only) with leveraged funds, no such taxes on profits utilizing leveraged funds is applicable. Therefore, UDFI does not apply. This is a tremendous benefit of a 401(k) over an IRA IF the account owner is wishing to leverage investments.
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