Unrelated Business Taxable Income - UBTI

You run a tractor smelting company. But on the side, largely to feed your workers, you incorporated a separate restaurant-on-wheels which was founded and originally funded by one of the founders of your tractor smelting company.

So, while your tractor company has done horribly the last few years, just barely breaking even, your local restaurant has had boom times. They took the old smelter blaster heater and reporposed it for their Sixteen Second Pizza dish, which was a huge hit. That restaurant had a million bucks in profit last year, and it paid tax separately on those profits, because that business (while majority owned by the tractor company) is, in fact, an unrelated business. The company doesn't consolidate its losses or gains or capital account on its books. It just holds it out there as a kind of subsidiary, tracking it only for tax purposes. And for a quick lunch.