Sep 26

When Using ROBS, Can a Family Member Invest or Work for the Business?

Yes, when using your IRA with the ROBS structure to invest in a business, you or any family member may invest or work for the new company. The exemption to “prohibited transactions” found under Internal Revenue Code Section 4975(f)(6)(b)(2) permit ownership or investment in the new company by any family members, friends, or colleagues.

When Using ROBS, Can a Family Member Invest or Work for the Business?

For more information, please contact us @ 800.472.0646.

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Sep 22

Why I Need To Use A Special IRA Custodian To Make Self-Directed IRA Investments

Pursuant to Section 408 of the Internal Revenue Code, an IRA must be established by a bank, financial institution, or authorized trust company.  Thus, a bank such as Wells Fargo, financial institution such as Vanguard, or a trust company such as the IRA Financial Trust Company are authorized to establish and administer IRAs.  The main difference is that not all IRA custodians allow the IRA to invest in alternative assets, such as real estate.

Individual Retirement Account is a term that most Americans have some understanding of.  They are commonly aware that it is a type of retirement account that was designed by Congress to encourage people to save for retirement. They generally understand that one can contribute a certain amount of income each year to the IRA account for investment. However, most do not have a solid understanding of the concept of tax deferral and the fact that retirement funds can be invested in assets other than stocks or mutual funds through what has become known as a Self-Directed IRA.

Why I Need To Use A Special IRA Custodian To Make Self-Directed IRA InvestmentsSo why don’t they know this? It’s not because the majority of Americans are uneducated, indifferent, or incurious – they simply have not been told. It’s not in the financial interests of the traditional institutional investment companies, such as Bank of America, Charles Schwab, or E-Trade, to encourage you to make alternative investments using retirement funds. They make money when you invest in their financial products and keep your money there for a long time, whether through highly profitable trading commissions or by leveraging the power of your savings. They make no money when you use your money to invest in alternative or nontraditional investments, such as a plot of land or a private business. They get no commissions as a result. They lose access to your money too. Why would they inform you that such a strategy was permissible and possibly even preferable depending on the circumstances?

Yet, such nontraditional or alternative retirement asset investments are perfectly legal. The IRS has permitted them since 1974. It says so right on the IRS website.

And the best way to make those investments is through the Self-Directed IRA.

What are the Responsibilities of a Self-Directed IRA Custodian?

The majority of all Self-Directed IRA custodians are non-bank trust companies for the reasons outlined above.  The Self-Directed IRA custodian or trust company will typically have a banking relationship with a bank who will hold the IRA funds in a special account called an omnibus account, offering each Self-Directed IRA client FDIC protection of IRA funds up to $250,000 held in the account.  For example, IRA Financial Trust is a non-banking IRA custodian. IRA Financial Trust has partnered with Northern Trust, one of the most respected private banks in the world, to offer our Self-Directed IRA clients a safe and secure way to make Self-Directed IRA investments.

The following are the primary roles and responsibilities of a Self-Directed IRA custodian:

  • IRS approved
  • Permitted to hold and custody IRA and 401(k) plan assets
  • Subject to state regulation by the state division of banking
  • Performance of administrative recordkeeping regarding the Self-Directed IRA
  • Perform administrative review of the Self-Directed IRA assets
  • Assisting in opening & funding your IRA account
  • Making the investment(s) on your behalf
  • Making distributions & paying expenses per your request
  • Providing you with quarterly statements
  • Answering questions about your account and our procedures
  • Reporting information required by the IRS and other governmental agencies
    • IRS Form 1099R – Distributions from your IRA
    • IRS Form 5498 – Contributions to and Fair Market Value of your IRA

What are the Differences Between a Self-Directed IRA Custodian and Third-Party Administrator?

All IRA custodians, banks, financial institutions, and approved trust companies are regulated entities that are authorized by the IRS to act as IRA custodians. Since custodians are directly approved by the IRS, they are the only entity in this group that’s allowed to physically hold retirement assets. IRA custodians are needed in order to make investments with IRA funds and, as a result, are regulated by federal and state banking authorities.

Whereas, an IRA administrator is not able to hold or custody IRA assets and is not approved or overseen by the IRS or any state banking regulators. IRA administrators essentially act as intermediaries between the IRA owner and a partner custodian.

Why Is It Important to Work Directly with an IRA Custodian?

IRA administrators are not subject to any IRS or state audit or reviews.  Accordingly, they are not subject to ongoing oversight, especially in the area of prohibited transactions, which is important in order to keep your Self-Directed IRA in full IRS compliance. Whereas, an IRA custodian is subject to quarterly state banking division audits and reviews, as well as IRS audits, helping keep your IRA safe from prohibited transactions and fraud.

To learn more about establishing a Self-Directed IRA account with the IRA Financial Trust Company, please contact a Self-Directed IRA specialist at 800-472-0646.

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Sep 20

Adam Bergman, IRA Financial Group Partner, Publishes Second Book on Self-Directed IRA

Newly published Self-Directed IRA in a Nutshell book will help explain the self-directed IRA structure and is available on Amazon.com

Adam Bergman, a partner with the IRA Financial Group, LLC, the markets leading provider of Self-Directed IRA LLC and Solo 401(k) plans, announces the release of his second book on the self-directed IRA structure, titled Self-Directed IRA in a Nutshell. The new book is available on Amazon.com and at most popular book sellers. This is Mr. Bergman sixth book in the area of retirement plans and taxation. “I am really excited to release my new book – Self-Directed IRA in a Nutshell, which I believe will offer an easy and simple introduction to the increasingly popular self-directed IRA retirement solution,” stated, Adam Bergman, author of the Self-Directed IRA in a Nutshell.

Mr. Bergman is a recognized expert on IRAs and 401(k) Plans and is the founder of the BergmanIRAReport.com and the Bergman401KReport.com. Mr. Bergman is the author of six previous books on the taxation of retirement accounts: Going Solo, The Checkbook IRA, Turning Retirement Funds into Start-Up Dreams, In God We Trust—In Roth We Prosper, and Solo 401(k) Plan in a Nutshell, which are all available on Amazon.com and Barnes & Nobles. Mr. Bergman is a frequent contributor to Forbes and has advised over 12,000 clients on the self-directed IRA LLC and Solo 401(k) Plan solutions.

Adam Bergman, IRA Financial Group Partner, Publishes Second Book on Self-Directed IRAAccording to Mr. Bergman, “I’ve written this book for people who want to learn more about the basics of what a self-directed IRA is and how it works without having to read a five hundred-page book. In 2015, I published an in depth and detailed 466 page book on the self-directed IRA structure titled, The Checkbook IRA, Why You Want It, Why You Need It, A Private Conversation With a Top Retirement Tax Attorney, that I am very proud of and which has hopefully helped many retirement investors learn more about the Self-Directed IRA option. However, in addition to have received some really great feedback from many people and clients who bought the book, I did get some comments requesting that I write another book on the self-directed IRA structure that was a bit more introductory and less comprehensive. So, I have decided to heed their advice and hope this book helps introduce many of the important concepts involved in establishing and using a self-directed IRA to make traditional as well as alternative asset investments, such as real estate with their retirement funds.”

Mr. Bergman has been quoted in a number of major publications on the area of self-directed retirement plans. Mr. Bergman has been interviewed on CBS News and has been quoted in Businessweek, CNN Money, Forbes, Dallas Morning News, Daily Business Review, Law.com, San Francisco Chronicle, U.S. Tax News, the Miami Herald, Bloomberg, Arizona Republic, San Antonio Express, Findlaw, Smart Money, USA Today, Houston Chronicle, Morningstar, and American Lawyer on the area of retirement tax planning.

Prior to joining the IRA Financial Group, LLC, Mr. Bergman worked as a tax and ERISA attorney at White & Case LLP, Dewey LeBoeuf LLP, and Thelen LLP, three of the most prominent corporate law firms in the world. Throughout his career, Mr. Bergman has advised thousands of clients on a wide range of tax and ERISA matters involving limited liability companies and retirement plans. Mr. Bergman received his B.A. (with distinction) from McGill University and his law degree (cum laude) from Syracuse University College of Law. Mr. Bergman also received his Masters of Taxation (LL.M.) from New York University School of Law.

Mr. Bergman is recognized as a leading retirement tax-planning expert and has lectured attorneys on the legal and tax aspects of Self-Directed IRA LLC and Solo 401(k) Plans. Mr. Bergman has also been retained by several leading IRA custodians, including Entrust, to offer expertise on the Self-Directed IRA structure. Mr. Bergman is a member of the Tax Division of the American Bar Association and New York State Bar Association.

IRA Financial Group is the market’s leading provider of self-directed IRA and Solo 401(k) Plans. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.

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Sep 19

Why Should You Open a Self-Directed Roth IRA?

Tax-Free Investing: The primary advantage of using a Self-Directed Roth IRA LLC to make investments is that all income and gains associated with the Roth IRA investment grow tax-free and will not be subject to tax upon withdrawal or distribution. This is because unlike traditional IRAs, you are generally not subject to any tax upon taking Roth IRA distributions once you reach the age of 59 1/2.

Investment Options: With the Self-Directed Roth IRA LLC, you can invest in almost any type of investment, including real estate, private business entities, tax liens, precious metals and commercial paper tax-free!

Diversification: With the Self-Directed Roth IRA LLC, you can invest in almost any type of investment, including real estate, allowing you to diversify and better protect your retirement portfolio.

“Checkbook Control”: With a Self-Directed Roth IRA LLC, you have even more advantages, including what’s called “checkbook control”. As manager of the Self-Directed IRA LLC you will have the ability to make IRA investments without seeking the consent of a custodian. Instead, all decisions are truly yours.

Access: With a Self-Directed Roth IRA LLC, you will have direct access to your IRA funds allowing you to make an investment quickly and efficiently. There is no need to obtain approvals from your custodian, or deal with time delays in awaiting approval from your custodian, or pay any review fees.

Speed: With a Self-Directed Roth IRA LLC, when you find an investment that you want to make with your IRA funds, simply write a check or wire the funds straight from your Self-Directed Roth IRA LLC bank account to make the investment. The Self-Directed Roth IRA LLC allows you to eliminate the delays associated with an IRA custodian, enabling you to act quickly when the right investment opportunity presents itself.

Lower fees: Another advantage to a Self-Directed Roth IRA LLC account is that you can save a lot of money on custodian fees. With the “checkbook control” Self-Directed Roth IRA LLC structure, you will not be required to seek custodian approval when making IRA investments allowing you to eliminate custodian transaction fees and account valuation fees.

Limited Liability: By using a Self-Directed Roth IRA LLC with “Checkbook Control”, your Roth IRA will benefit from the limited liability protection afforded by using an LLC. By using an LLC, all your Roth IRA assets held outside the LLC will be shielded from attack. This is especially important in the case of Roth IRA real estate investments where many state statutes impose an extended statute of limitation for claims arising from defects in the design or construction of improvements to real estate.

Asset & Creditor Protection: By using a Self-Directed Roth IRA LLC with “Checkbook Control”, the Roth IRA holder’s Roth IRA will be protected for up to $1 million in the case of personal bankruptcy. In addition, most states will shield a Self-Directed Roth IRA from creditors attack against the Roth IRA holder outside of bankruptcy. Therefore, by using a Self-Directed Roth IRA LLC, the Roth IRA will be generally protected against creditor attack against the Roth IRA holder.

Self-Directed Roth IRA LLC Structure

To view a diagram of the Self-Directed IRA LLC structure, please select the image below.

Self Directed IRA LLC

 

Please contact one of our IRA Experts at 800-472-0646 for more information.

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Sep 15

Think You Can Hold Gold Or Coins In A Self-Directed IRA At Home – Think Again

Thanks to significant advertising by precious metals and coin dealers, it has become widely known that gold, silver, palladium bullion, as well as certain coins can be purchased with retirement account funds. In fact, Internal Revenue Code (“IRC”) Section 408(m) sets forth a list of approved precious metals and coins that are not considered “collectibles” and may be purchased with retirement funds. Even though IRC Section 408 generally deals with IRAs, section (m) applies to both IRAs and 401(k) plans.

By using a Self-Directed IRA to purchase Internal Revenue Service (“IRS”) approved precious metals or coins, one is able to seemingly better diversify his or her retirement portfolio as well as generate tax-free gains on the sale of the metals or coins.

IRC Section 408(m)(3)(A) lists the types of coins that may be purchased with retirement funds, which generally are American Eagle and U.S. state minted coins of a certain finesse.  The Technical and Miscellaneous Revenue Act of 1988 (“TAMRA”) also allowed for the purchase of state minted coins. Whereas IRC 408(m)(3)(B), refers to gold, silver, or palladium bullion of a certain finesse which must be held in the “physical possession” of a U.S. trustee as described under subsection IRC 408(a), and which essentially refers to a U.S. bank, financial institution, depository, or approved trust company. Therefore, one should never hold IRS approved coins or precious metals/bullion owned by his or her retirement account personally, such as in his or her home.

There has been some uncertainty as to whether the “physical possession” requirement applies to both IRS approved coins and metals/bullion.  IRC Section 408(m) clearly states that gold, silver or palladium bullion must be held in the physical possession of a trustee, otherwise known as a U.S. bank, financial institution or approved trust company.  Hence, IRS approved precious metals may not be held personally or anywhere outside of the physical possession of a trustee, as defined under IRC Section 408(a). But what about IRS approved coins?  Can IRS approved coins, as described in IRC Section 408(m)(3)(A), which does not include the “physical possession of a trustee” language be held personally?  Unfortunately, there is not much IRS guidance on this point, but since coins may also be bullion, as defined in IRC Section 408(m)(3)(B), most tax practitioners take the position that IRS approved coins purchased by a retirement account should be held in the physical possession of a trustee, as defined under IRC Section 408. However, the language in TAMRA does state that a retirement account may purchase state minted coins so long as a person holds them independent of the IRA owner. The language in TAMRA does not define “person” and interestingly does not refer to the term “trustee.” So can one hold IRS approved coins personally?  The safest approach is to hold IRS approved coins owned by a retirement account in the “physical possession of a trustee.”

That begs the next question; can an LLC owned by a retirement account hold IRS approved coins and precious metals/bullion in a safe deposit box in the name of the LLC?  Over the last ten or so years, the self-directed IRA LLC or checkbook control IRA has gained popularity among retirement investors, including precious metals and coin investors.  A common self-directed IRA LLC strategy involves IRS approved coins or bullion purchased by the LLC manager in the name of the LLC, which is owned one-hundred percent by the IRA, and then held at a bank safe deposit box in the name of LLC. So what does the IRS say about this? Unfortunately not very much, but it is important to review what we do know.

Think You Can Hold Gold Or Coins In A Self-Directed IRA At Home - Think AgainLet’s start with IRS approved coins. If a an IRA holder holds coins in a safe deposit box at a U.S. bank in the name of the Self-Directed IRA LLC, the coins are clearly not being held by the IRA owner personally, which in the case of state minted coins would seem to satisfy the language in TAMRA. In the case of IRS approved coins that are not state minted, IRC Section 408(m)(3)(A) does not seemingly include a “physical possession” requirement, however, some IRS approved coins, such as American Eagles, can be considered bullion and could then fall under the “physical possession” requirement under IRC 408(m)(3)(B) for bullion. Thus, holding IRS approved coins at a bank safety deposit box in the name of the IRA LLC Plan is certainly not in the “physical possession” of the IRA holder since they will physically be held in a safe deposit box of the bank in the name of the IRA LLC. However, the question then becomes is whether the bank where the coins are being stored in the name of the IRA LLC is considered the trustee of the IRA, as defined by IRC Section 408. The answer to this question is also relevant when examining whether bullion/precious metals owned by a self-directed IRA LLC can be stored at a bank safe deposit box.

Unlike coins, IRC Section 408(m)(3)(B) clearly holds that the IRS approved bullion/precious metals must be held in the physical possession of a trustee and may not be held personally. We have learned that a trustee is defined under IRC Section 408 as a U.S bank, financial institution, or approved trust company, including a depository.  The definition of a U.S. trustee is outlined in IRC Section 408(a), which discusses the definition of an IRA.  So the argument goes if the IRS approved coins or bullion/precious metals are held at a bank safe deposit box in the name of the IRA LLC and the bank is not the trustee or the custodian of the IRA that hold the coins or metals/bullion, then is the physical possession definition satisfied and is the bank acting as the trustee of the IRA which owns the metals?  There are arguments on both sides.  For example, IRC Section 408(m) also applies to 401(k) plans and the definition of a 401(k) plan trustee is not the same as a trustee of an IRA.  Since the physical possession requirement outlined in IRC Section 408(m)(3)(B) applies to IRAs and 401(k) plans, some tax practitioners believe that the definition is satisfied so long as the bullion/metals are held at any bank or financial institution that satisfies the definition of trustee, as outlined in IRC Section 408(a), and not necessarily the actual trustee of the retirement account owning the coins, bullion/metals. The language in IRC Section 408(m)(3)(B) uses the term “a trustee” and not “the trustee” offering some support for the position that the coins, metals/bullion can be held at any trustee, as defined under IRC 408(a) and not just the trustee of the IRA.  This would make sense since a depository is considered a trustee pursuant to IRC Section 408(a), but may not be the actual trustee of the IRA owning the coins, metals/bullion.

So What Should I Do?

The safest approach for anyone seeking to purchase IRS approved coins or precious metals/bullion with their retirement account is to hold them in the physical possession of a trustee, such as a depository.  The IRS, as outlined in IRC 408(m)(3)(B), clearly does not allow any individual to hold IRS approved coins or precious metals/bullion personally, such as in his or her home. However, the language in TAMRA seems to suggest that state minted coins can be held by a person other than the IRA holder, without referencing the term trustee, as defined in IRC Section 408.  Nevertheless, it is recommended that IRS approved coins should not be held personally by the IRA holder and should be held at a trustee, as defined in IRC 408.

For individuals with a Self-Directed IRA LLC seeking to hold IRS approved coins and precious metals at a bank safe deposit box, there is risk to this position, as the IRS has not offered any formal guidance. In the case of a Self-Directed IRA, if the bank where the safe deposit box is not the trustee of the IRA that purchased the metals or coins, an argument can be made that the metals or coins would not satisfy the physical possession definition outlined in IRC section 408 since the bank could not serve as the IRA trustee. The safest approaching to holding IRS approved coins or bullion/precious metals is at a trustee, as defined in IRC Section 408, such as an approved depository.  One thing that is clear, is the one should not ever hold IRS approved coins or precious metals/bullion personally.

In general, the rules surrounding the ownership and possession of IRS precious metals or coins are complicated.  Therefore, it is crucial that one seeks the advice of a tax attorney or tax professional in order to safely navigate the IRS rules.

For more information about holding precious metals and coins in an IRA, please contact us @ 800.472.0646.

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Sep 12

Adam Bergman, IRA Financial Group Partner, Authors Article on Holding IRS Approved Coins and Precious Metals in a Self-Directed IRA for Forbes

Adam Bergman is a contributor to Forbes.com on the topic of retirement taxation, with attention to the self-directed IRA rules and investments

Adam Bergman, partner with the IRA Financial Group, authors an article on Forbes.com titled, “Buying Gold Or Coins In An IRA Creates Possession Issues”. Thanks to significant advertising by precious metals and coin dealers, it has become widely known that gold, silver, palladium bullion, as well as certain coins can be purchased with retirement account funds, such as a self-directed IRA gold. However, there has been great degree of attention on the subject of how one is able to hold IRS approved coins and precious metals/bullion. “I felt it was important to write an article that offered an in-depth analysis of the rules involved in owning and holding IRS approved coins and precious metals as per IRC Section 408(m).” stated Adam Bergman, IRA Financial Group Partner.

Mr. Bergman has writing about various items involving the taxation of retirement funds, particularly on the matters of Self-Directed IRAs and Solo 401K Plans. For example, Mr. Bergman recently wrote a blog about the self-directed Solo 401(k) Plan as well as the impact of the Greek financial crisis on retirement accounts. Mr. Bergman has just contributed an article to Forbes.com on the topic of retirement tax planning tax-planning opportunities for the millennials or Generation Y.

Adam Bergman, IRA Financial Group Partner, Authors Article on Holding IRS Approved Coins and Precious Metals in a Self-Directed IRA for ForbesAdam Bergman is a partner with the IRA Financial Group, LLC, the markets leading provider of Self-Directed IRA LLC and Solo 401(k) plans. Mr. Bergman is also the President of the IRA Financial Trust Company, a self-directed IRA custodian. In addition, Mr. Bergman is a recognized expert on IRAs and 401(k) Plans and is the founder of the BergmanIRAReport.com and the Bergman401KReport.com. Mr. Bergman is the author of six books on self-directed retirement plans, such as “Going Solo: America’s Best Kept Retirement Secret For the Self-Employed, The Checkbook IRA, Self-Directed IRA in a Nutshell, In God We Trust – In Roth We Prosper, and Turning Retirement Funds in” available on Amazon, and is a frequent contributor to Forbes. Mr. Bergman has advised over 12,000 clients on the Self-Directed IRA LLC and Solo 401(k) Plan solutions.

Mr. Bergman has been quoted in a number of major publications on the area of self-directed retirement plans. Mr. Bergman has been interviewed on CBS News and has been quoted in Businessweek, CNN Money, Forbes, Dallas Morning News, Daily Business Review, Law.com, San Francisco Chronicle, U.S. Tax News, the Miami Herald, Bloomberg, Arizona Republic, San Antonio Express, Findlaw, Smart Money, USA Today, Houston Chronicle, Morningstar, and American Lawyer on the area of retirement tax planning.

Prior to joining the IRA Financial Group, LLC, Mr. Bergman worked as a tax and ERISA attorney at White & Case LLP, Dewey LeBoeuf LLP, and Thelen LLP, three of the most prominent corporate law firms in the world. Throughout his career, Mr. Bergman has advised thousands of clients on a wide range of tax and ERISA matters involving limited liability companies and retirement plans. Mr. Bergman received his B.A. (with distinction) from McGill University and his law degree (cum laude) from Syracuse University College of Law. Mr. Bergman also received his Masters of Taxation (LL.M.) from New York University School of Law.

Mr. Bergman is recognized as a leading retirement tax-planning expert and has lectured attorneys on the legal and tax aspects of Self-Directed IRA LLC and Solo 401(k) Plans. Mr. Bergman is a member of the Tax Division of the American Bar Association and New York State Bar Association.

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.

IRA Financial Group is the market’s leading “checkbook control Self Directed IRA and Solo 401(k) Plan provider. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-06

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Sep 08

Your IRA Can Be A Lousy Business Partner

The following originally appeared on Forbes.com:

With the median retirement account value in the U.S. at around $91,800 as of June 2015 according to Fidelity, it is not uncommon for retirement account holders looking to make real estate and other alternative asset investments to consider using some personal funds in combination with their retirement funds.  With real estate and other alternative asset prices rising over the last several years, seeking additional funding from non-retirement account sources has become far more commonplace for retirement account investors.  The Internal Revenue Code (“IRC”) does not specifically address this type of transaction, although, it does discuss what types of retirement account investments are “prohibited”.

The IRC does not describe what a retirement account can invest in, only what it cannot invest in. IRC Sections 408 & 4975 prohibits Disqualified Persons from engaging in certain types of transactions. A disqualified person is generally defined as the IRA holder and any of his or her lineal descendants as well as any entity controlled by such persons.  The foundation of the prohibited transaction rules are based on the premise that investments involving retirement accounts and related parties are handled in a way that benefits the retirement account and not the IRA owner.

The legality of partnering with ones retirement funds to make real estate and other alternative asset investments has finally been reviewed by a Court of Law.  In KELLERMAN, 115 AFTR 2d 2015-1944 (531 B.R. 219) (Bktcy Ct AR), 05/26/2015, a bankruptcy case, the court held that a partnership formed by a self-directed IRA and an entity owned by the IRA holder and his spouse personally was a prohibited transaction.

In the case, Barry Kellerman and his wife each own a 50 percent interest in Panther Mountain personally.  To effect the acquisition and development of the four-acre property, the IRA and Panther Mountain formed a partnership whereby the IRA contributed property and Panther Mountain contributed property and cash.  The case is a clear example that using retirement and personal funds in the same transaction can potentially trigger a self-dealing prohibited transaction under IRC 4975(c)(1)(D).  By entering into a transaction with IRA funds that in some way directly or indirectly involves a disqualified person, in this case Panther Mountain, which was owned by the Kellermans personally, the IRA owner then is saddled with the burden of proving the transaction does not violate any of the self-dealing or conflict of interest prohibited transaction rules under IRC Section 4975, a burden that as this case shows could be difficult to satisfy.

As the court stated, “Further, and cumulatively, Barry Kellerman transferred or used “the income or assets of [the IRA]” for the benefit of each of the aforementioned disqualified persons and as a fiduciary dealt with “ the income or assets of [the IRA]” in his own interest or for his own account.  The real purpose for these transactions was to directly benefit Panther Mountain and the Kellermans in developing both the four acres and the contiguous properties owned by Panther Mountain. The Kellermans each own a 50 percent interest in Panther Mountain and stood to benefit substantially if the four-acre tract and the adjoining land were developed into a residential subdivision.”

Anyone thinking of combining retirement and personal funds in the same retirement account investment should think twice.  The Kellerman case is a great example why using retirement funds and personal assets in the same transaction is not advisable and highly risky as it can potentially trigger the IRC Section 4975 prohibited transaction rules.

Adam Bergman is a tax partner with the IRA Financial Group and founder of the Bergman Law Group, LLC. Contact him via email at adamb@irafinancialgroup.com or call him at 800-472-0646 Ext. 12.

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Sep 06

Self-Directed IRA Real Estate Investor Focusing on Home Fixer Uppers In Light of Strong Home Prices

High home prices forcing real estate IRA investors to look at fixer-uppers

IRA Financial Group, the leading provider of self-directed IRA LLC and Solo 401(k) plan solutions, has seen a growing trend of real estate IRA clients looking to use their self-directed IRA funds to purchase home fixer-uppers in light of high residential home prices across the country. “We have seen more and more self-directed IRA clients looking to use their retirement funds to purchase residential home fixer-uppers as prices on newly improved homes have escalated over the years”, stated Jacky Ospina, a self-directed IRA specialist with the IRA Financial Group.

The primary advantage of using a Self Directed IRA LLC to make investments is that all income and gains associated with the IRA investment grow tax-deferred.

With IRA Financial Group’s self directed IRA LLC solution, traditional IRA or Roth IRA funds can be used to buy a vacation property tax-free. “With depressed real estate prices, many retirement investors are looking to buy their dream retirement home with IRA funds as a year-end tax planning solution”, stated Adam Bergman, a tax attorney with the IRA financial Group. “Using a Self Directed IRA LLC to buy real estate presents a number of exciting tax planning opportunities”, added Ms. Ospina.

Self-Directed IRA Real Estate Investor Focusing on Home Fixer Uppers In Light of Strong Home PricesIRA Financial Group’s Self-Directed IRA for real estate investors, also called a real estate IRA with checkbook control, is an IRS approved structure that allows one to use their retirement funds to make real estate and other investments tax-free and without custodian consent. The Self-Directed IRA LLC involves the establishment of a limited liability company (“LLC”) that is owned by the IRA (care of the IRA custodian) and managed by the IRA holder or any third-party. As manager of the IRA LLC, the IRA owner will have control over the IRA assets to make traditional as well as non-traditional investments, such as real estate.

Using IRA Financial Group’s self directed IRA LLC with “checkbook control” solution to make real estate investments offers a number of very interesting investment opportunities, including the ability to diversify ones retirement portfolio with real estate, precious metals, and other alternative investment options.

IRA Financial Group is the market’s leading provider of self-directed retirement plans. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

The IRA Financial Trust Company, a self-directed IRA custodian, was founded by Adam Bergman, a partner with the IRA Financial Group.

Adam Bergman, IRA Financial Group partner, has written five books on the topic of self-directed retirement plans, including, “The Checkbook IRA”, “Going Solo,” Turning Retirement Funds into Start-Up Dreams, Solo 401(k) Plan in a Nutshell, and in God We Trust in Roth We Prosper.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646.

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Sep 02

What Rights Does the Surviving Spouse as Sole Beneficiary of a Traditional IRA Have After the Death of a Spouse?

A surviving spouse who is sole beneficiary of an IRA and has an “unlimited right to withdraw” from it may, at any time after the owner’s death, elect to treat the IRA as though he or she were its owner, rather than its beneficiary. The election may only be made if the spouse is the only beneficiary of the IRA and is not available if a trust is a beneficiary, even if the surviving spouse is sole beneficiary of the trust. It may, however, be made by a surviving spouse who rolls over into an IRA a distribution from a qualified plan of a deceased spouse’s employer or former employer.

What Rights Does the Surviving Spouse as Sole Beneficiary of a Traditional IRA Have After the Death of a Spouse?Minimum distributions to an electing surviving spouse are determined under the rules for IRA owners, not the rules for beneficiaries, except that the election may not cause there to be a minimum distribution for the year of the owner’s death if the owner died before his or her required beginning date. For example, if a surviving spouse is 72 years old when a 68-year-old owner dies, no distribution is required for the year of death, even if the spouse makes the election, even though the spouse’s required beginning date occurred before that year. An electing spouse is treated as IRA owner “for all purposes under the Internal Revenue Code,” including the premature withdrawal penalty imposed by Internal Revenue Code Section 72(t) , which generally applies to distributions to owners before age 59 1/2 but does not apply to distributions to beneficiaries.

Please contact one of our IRA Experts at 800-472-0646 for more information.

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Aug 30

IRS Issues New Guidance on IRA Rollovers

On August 24, the Internal Revenue Service provided a self-certification procedure designed to help recipients of retirement plan distributions who inadvertently miss the 60-day time limit for properly rolling these amounts into another retirement plan or individual retirement arrangement (IRA).

In Revenue Procedure 2016-47, posted on Friday on IRS.gov, the IRS explained how eligible taxpayers, encountering a variety of mitigating circumstances, can qualify for a waiver of the 60-day time limit and avoid possible early distribution taxes. In addition, the revenue procedure includes a sample self-certification letter that a taxpayer can use to notify the administrator or trustee of the retirement plan or IRA receiving the rollover that they qualify for the waiver.

IRS Issues New Guidance on IRA RolloversNormally, an eligible distribution from an IRA or workplace retirement plan can only qualify for tax-free rollover treatment if it is contributed to another IRA or workplace plan by the 60th day after it was received. In most cases, taxpayers who fail to meet the time limit could only obtain a waiver by requesting a private letter ruling from the IRS (under Revenue Procedure 2003-16).

A taxpayer who missed the time limit will now ordinarily qualify for a waiver if one or more of 11 circumstances, listed in the revenue procedure, apply to them:

  • 1. An error was committed by the financial institution receiving the contribution or making the distribution to which the contribution relates;
  • 2. The distribution was made in the form of a check, but, that check was misplaced and never cashed;
  • 3. The distribution was deposited into an account that the taxpayer mistakenly thought was an eligible retirement plan and the funds remained in that account;
  • 4. The taxpayer’s principal residence was severely damaged;
  • 5. A member of the taxpayer’s family died;
  • 6. The taxpayer or a member of the taxpayer’s family was seriously ill;
  • 7. The taxpayer was incarcerated;
  • 8. Restrictions were imposed by a foreign country;
  • 9. A postal error occurred;
  • 10. The distribution was made on account of a levy under Internal Revenue Code Section 6331, and the proceeds of the levy have been returned to the taxpayer; or
  • 11. The party making the distribution to which the rollover relates delayed providing information that the receiving plan or IRA required to complete the rollover despite the taxpayer’s reasonable efforts to obtain the information.

Note that relief is not available if the IRS has previously denied a rollover request.

Ordinarily, the IRS and plan administrators and trustees will honor a taxpayer’s truthful self-certification that they qualify for a waiver under these circumstances. Moreover, even if a taxpayer does not self-certify, the IRS now has the authority to grant a waiver during a subsequent examination. Other requirements, along with a copy of a sample self-certification letter, can be found in the revenue procedure.

For more information about the new IRA Rollover Rule, please contact an IRA Expert @ 800.472.0646.

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