On the Record: All that Glitters Isn't Tax Exempt

Rental income received by an exempt organization from real property is exempt from UBIT. However, rental income from personal property is subject to the tax. Therefore, if a donor gives a vacant lot to the church next door and the church rents the real property to a third party, the rental income is not subject to UBIT. If a lease includes both personal property and real property, the amount of the rental income that could be subject to UBIT would be determined on a sliding scale tied to how the rental income is allocated between the personal and real property(3).