Jul 30

New Podcast – Using your IRA to invest in Real Estate – Opportunities and Pitfalls from Taxation and how to avoid UBTI

IRA Financial Group’s Adam Bergman discusses some of the tax implications of using your Self-Directed IRA to purchase real estate.

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Jul 28

Gold Market Slump Surprisingly Not Impacting Self-Directed IRA Investors Demand For Precious Metals

Interest in precious metals continues to be strong in light of 5-year gold market slide

IRA Financial Group, the leading provider of “checkbook control” Self-Directed IRA LLC solutions continues to see strong demand form its Self-Directed IRA and Solo 401(k) plan clients for gold and other IRS approved precious metals in light of five year slide for the gold market. Gold prices continue to fall largely weighed down by the dollar’s relentless gains as the prospect of the first U.S. interest-rate increase in more than nine years loomed. In addition, as of July 20, 2015, silver prices sank to their lowest level since August 2009, and platinum closed below $1,000 a troy ounce for the first time in more than six years. “We have been surprised to see continued interest in the self-directed IRA for precious metals in light of the weakening gold market,” stated Jacky Ospina, a retirement specialist with the IRA Financial Group.

The IRS does not list the type of assets or investments that may be purchased with retirement funds, but does indicate which categories of assets or investments are not permitted. The categories of transactions that are not permitted to be purchased using a Self-Directed IRA LLC can be found in Internal Revenue Code Sections 408 & 4975.

When it comes to coins or metals, Internal revenue Code Section 408 is generally the provision that applies. In general, collectibles such as artworks, rugs, stamps, certain coins, beverages and antiques, etc. are not allowed within a Self-Directed IRA LLC, pursuant to Internal Revenue Code Section 408.

Gold Market Slump Surprisingly Not Impacting Self-Directed IRA Investors Demand For Precious MetalsInternal Revenue Code Section 408 is specific as to what defines a collectible. Some notable exceptions are allowed for certain gold (such as American Eagle) and silver coins and any coins issued by a state. Legislation in 1997 further liberalized the rules for IRAs by making reference to specific definitions of acceptable coins in USCS, title 31; IRC sections 5112(a), (e) and (k); the Commodity Exchange Act; and IRC section 408(m)(3).

According to Ms. Ospina, “our Self-Directed gold and Solo 401(k) Plan clients still seem to have unwavering faith in the gold and silver market and believe that using retirement funds to but precious metals can potentially generate strong returns while also offering investment diversification and protection from a falling equity market or U.S. dollar.”

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 contact us at 800-472-0646.

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Jul 27

How to Make the Most of Your Self Directed IRA Investments

A Self-Directed IRA LLC offers one the ability to use his or her retirement funds to make almost any type of investment on their own without requiring the consent of any custodian or person. The IRS and Department of Labor only describe the types of investments that are prohibited, which are very few.

The foundation of the prohibited transaction rules are based on the premise that investments involving IRA and related parties are handled in a way that benefits the retirement account and not the IRA owner. The rules prohibit transactions between the IRA and certain individuals known as “disqualified persons”. The outline for these rules can be found in Internal Revenue Code Section 4975. In general, the definition of a “disqualified person” (Internal Revenue Code Section 4975(e)(2)) extends into a variety of related party scenarios, but generally includes the IRA holder, any ancestors or lineal descendants of the IRA holder, and entities in which the IRA holder holds a controlling equity or management interest.

The following are some examples of types of investments that can be made with your Self-Directed IRA LLC

  • Residential or commercial real estate
  • Domestic of foreign real estate
  • Raw land
  • Foreclosure property
  • Mortgages
  • Mortgage pools
  • Deeds
  • Private loans
  • Tax liens
  • Private businesses
  • Limited Liability Companies
  • Limited Liability Partnerships
  • Private placements
  • Precious metals and certain coins
  • Stocks, bonds, mutual funds
  • Foreign currencies

How to Make the Most of Your Self Directed IRA InvestmentsReal Estate

The IRS permits using a Self-Directed IRA LLC to purchase real estate or raw land. Since you are the manager of the Self-Directed IRA LLC, making a real estate investment is as simple as writing a check from your Self-Directed IRA bank account. The advantage of purchasing real estate with your Self-Directed IRA LLC is that all gains are tax-deferred until a distribution is taken (pre-tax 401(k) distributions are not required until the IRA holder turns 70 1/2). In the case of a Roth Self-Directed IRA, all gains are tax-free.

For example, if you purchased a piece of property with your Self-Directed IRA LLC for $100,000 and you later sold the property for $300,000, the $200,000 of gain appreciation would generally be tax-deferred. Whereas, if you purchased the property using personal funds (non-retirement funds), the gain would be subject to federal income tax and in most cases state income tax.

Helpful Tips :

  • The deposit and purchase price for the real estate property should be paid using Self-Directed IRA LLC funds or funds from a non-disqualified third-party
  • No personal funds or funds from a “disqualified person” should be used
  • All expenses, repairs, taxes incurred in connection with the Self-Directed IRA real estate investment should be paid using retirement funds – no personal funds should be used
  • If additional funds are required for improvements or other matters involving the real estate investments, all funds should come from the Self-Directed IRA or from a non “disqualified person”
  • If financing is needed for a real estate transaction, only nonrecourse financing should be used. A nonrecourse loan is a loan that is not personally guaranteed and whereby the lender’s only recourse is against the property and not against the borrower.
  • With a Self-Directed IRA the use of a nonrecourse loan would be subject to tax pursuant to Internal Revenue Code Section 514, which would not be the case with a Solo 401(k) Plan. This provides a very exciting investment opportunity for a self-employed individual or small business owner who is eligible for a Solo 401(k) Plan.
  • No services should be performed by the IRA holder or “disqualified person” in connection with the real estate investment. In general, other then typical trustee type of services (necessary and required tasks in connection with the maintenance of the plan), no active services should be performed by the plan participant or a “disqualified person” with respect to the real estate transaction.
  • Title of the real estate purchased should be in the name of the Self-Directed IRA LLC. For example, if Joe Smith established a Self-Directed IRA LLC and named the LLC XYZ, LLC, title to real estate purchased by Joe’s Self-Directed IRA LLC would be as follows: XYZ LLC
  • Keep good records of income and expenses generated by the real estate investment
  • All income, gains or losses from the Self-Directed IRA LLC real estate investment should be allocated to the IRA
  • Make sure you perform adequate diligence on the property you will be purchasing especially if it is in a state you do not live in
  • Make sure you will not be engaging in any self-dealing real estate transaction which would involve buying or selling real estate that will personally benefit you or a “disqualified person”

Tax Liens

The IRS permits the purchase of tax liens and tax deeds with a Self-Directed IRA. By using a Self-Directed IRA to purchase tax-liens or tax deeds, your profits are tax-deferred back into your retirement account until a distribution is taken (pre-tax IRA distributions are not required until the Plan Participant turns 70 1/2). In the case of a Roth Self-Directed IRA, all gains are tax-free.

More importantly, with a Self-Directed IRA, you, as manager of the Self-Directed IRA LLC, will have “checkbook control” over your retirement funds allowing you to make purchases on the spot without custodian consent. In other words, purchasing a tax-lien or tax deed is as easy as writing a check!

Helpful Tips :

  • The deposit and purchase price for the tax lien should be paid using Self-Directed IRA funds or funds from a non-disqualified third-party
  • No personal funds or funds from a “disqualified person” should be used
  • A check from the Self-Directed IRA account should be taking to auction or used for the tax lien purchase – no personal check or cash should be used
  • No credit card should be applied for in the name of the Self-Directed IRA as that would violate the IRS prohibited transaction rules. A pure debit card is allowable
  • All income, gains or losses from tax lien investments should be allocated to the Solo 401(K) Plan

Loans & Notes

The IRS permits using IRA funds to make loans or purchase notes from third parties. By using a Self-Directed IRA to make loans or purchase notes from third-parties, all interest payments received would be tax-deferred until a distribution is taken (pre-tax IRA) distributions are not required until the Plan Participant turns 70 1/2). In the case of a Roth Self-Directed IRA, all gains are tax-free.

For example, if you used a Self-Directed IRA to loan money to a friend, all interest received would flow back into your Self-Directed IRA tax-free. Whereas, if you lent your friend money from personal funds (non-retirement funds), the interest received would be subject to federal and in most cases state income tax.

Helpful Tips :

  • The loan or note amount should be paid using Self-Directed IRA funds or funds from a non-disqualified third-party
  • No personal funds or funds from a “disqualified person” should be used in the loan transaction
  • The loan or note should not involve a “disqualified person” directly or indirectly
  • The loan or note should have a stated interest rate of at least Prime as per the Wall Street Journal (3.25% as of January 1, 2015)
  • All interest and principal associated with the loan or note should be allocated to the Self-Directed IRA
  • It is good practice to have the loan terms documented in a promissory note or loan agreement
  • If you will be acting as the lender, consider securing the loan with an interest or lien in an asset owned by the borrower
  • Make sure you will not be engaging in any self-dealing loan transaction which would involve a loan or note that will personally benefit you or a “disqualified person”

Private Businesses

With a Self-Directed IRA you are permitted to purchase an interest in a privately held business. The business to be purchased can be any entity other than an S Corporation (i.e. limited liability company, C Corporation, partnership, etc.). When investing in a private business using 401(k) funds, it is important to keep in mind the “Disqualified Person” and “Prohibited Transaction” rules under IRC 4975 and the Unrelated Business Taxable Income rules under IRC 512.

Helpful Tips :

  • The deposit and purchase price for the business should be paid using Self-Directed IRA or funds from a non-disqualified third-party
  • No personal funds or funds from a “disqualified person” should be used to purchase the business
  • The purchase of the stock or assets of the business should not directly or indirectly benefit the plan participant personally or any “disqualified person”
  • The purchase of a business operated via an LLC or partnership will potentially trigger the Unrelated Business Taxable Income rules under IRC 512 and a corresponding tax of approximately 40% for 2015 would be applied
  • Stock of an S Corporation should not be purchased with retirement funds as the S corporation rules only allow individuals to be S Corporation shareholders
  • The purchase of stock of a C Corporation would not trigger the application of the Unrelated Business Taxable Income rules under IRC 512
  • All income, gains or losses from the purchased business should be allocated to the Self-Directed IRA
  • The plan participant or any “disqualified person” should not have any ownership in the business being purchased and should not directly or indirectly personally benefit from the acquisition
  • Make sure to perform adequate diligence on the business you will be purchasing or investing in especially if you will be buying the stock/interests and not the assets
  • Make sure you will not be engaging in any business acquisition transaction which would involve buying or selling a business that will personally benefit you or a “disqualified person”

Precious Metals & Coins

The Self-Directed IRA structure allows for investments into precious metals and certain coins. The advantage of using a Self-Directed IRA to purchase precious metals and/or coins is that their values generally keep up with, or exceed, inflation rates better than other investments. In addition, the IRS approved metals can be held in the name of the Self-Directed IRA at a financial organization (any local bank) safe deposit box eliminating depository fees and the coins can be held in the personal possession of the plan participant or trustee.

Helpful Tips :

  • Only IRS approved metals and coins may be purchases as per Internal Revenue Code 408(m)
  • The IRS approved precious metals or coins being purchased by the plan should be paid using Self-Directed IRA funds or funds from a non-disqualified third-party
  • With respect to IRS approved precious metals, the metals should not be held in the personal possession of any individual
  • With respect to the IRS approved precious metals, the metals must be held in the “physical possession” of a U.S. depository or at a U.S. bank
  • With respect to the IRS approved coins, the “physical possession” requirement that applies to precious metals does not appear to apply to coins
  • An affidavit signed by the trustee of the plan confirming that the IRS approved precious metals or coins are being purchased with being held in the sole interest of the plan is good practice
  • All income, gains or losses from the purchased precious metals or coins should be allocated to the Self-Directed IRA
  • IRS approved precious metals should not be held at a bank outside the United States
  • Perform adequate diligence on the dealer with which you will be transacting with for the purchase of metals or coins

Foreign Currencies

The IRS does not prevent the use of IRA funds to purchase foreign currencies, including Iraqi Dinars. In fact, the Self-Directed IRA Plan structure permits the purchase of foreign currencies. Many believe that foreign currency investments offer liquidity advantages to the stock market as well as significant investment opportunities.

By using a Self-Directed IRA to purchase foreign currencies, such as the Iraqi Dinar, all foreign currency gains generated would be tax-deferred until a distribution is taken (pre-tax IRA distributions are not required until the Plan Participant turns 70 1/2). In the case of a Roth Self-Directed IRA, all gains are tax-free.

Helpful Tips :

  • Make sure you have a solid background in trading currencies – high volatile and significant risk
  • If you will be investing with a third-party, perform adequate diligence on the individual and make sure the individual has the knowledge to trade foreign currencies and all his/her securities licenses are in good standing.
  • Beware of leverage – it is allowable but it would trigger the application of the Unrelated Business Taxable Income rules under IRC 512 and thereby a corresponding tax
  • No personal guarantee of any leverage or loan obligation is permitted
  • All income, gains or losses from the foreign currency transactions should be allocated to the Self-Directed IRA

Stocks, Bonds, Mutual Funds, CDs

In addition to non-traditional investments such as real estate, a Self-Directed IRA may purchase stock, bonds, mutual funds, and CDs. The advantage of using a self-directed IRA is that you are not limited to just making these types of investments. With a Self-Directed IRA with “checkbook control” you can open a stock trading account with any financial institution as well as purchase real estate, buy tax liens, or lend money to a third-party. Your investment opportunities are endless! When purchasing stocks or securities with a Self-Directed IRA, all income and gains, including dividends, would flow back to the plan without tax. With a Roth Self-Directed, all gains are tax-free. Whereas, if you purchased stocks with personal funds, all income and gains would be subject to federal and in most cases state income tax would be subject to federal and in most cases state income tax.

Helpful Tips :

  • If you will be investing with a third-party, perform adequate diligence on the individual and make sure the individual has the knowledge to trade stocks or securities and all his/her securities licenses are in good standing.
  • Beware of promoters who are promising high returns and that do not work at reputable financial institutions – high likelihood of fraud
  • Beware of leverage – it is allowable but it would trigger the application of the Unrelated Business Taxable Income rules under IRC 512 and thereby a corresponding tax
  • No personal guarantee of any leverage or loan obligation is permitted
  • Open up a brokerage account in the name of the Self-Directed IRA – not a personal account
  • All income, gains or losses from the stock investments should be allocated to the Self-Directed IRA

If you have any questions about whether your specific Self-Directed IRA transaction would potentially be in violation of IRS rules, please contact a tax professional at the IRA Financial Group at 800-472-0646.

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Jul 24

What reporting requirements exist for Traditional IRA holders?

What reporting requirements exist for Traditional IRA holders?Individuals maintaining IRAs and surviving beneficiaries under IRAs must usually file an annual information return on Form 5329. Also, an individual maintaining an IRA must make an information filing for each year in which a nondeductible IRA contribution is made or a distribution is received from an IRA. The filing, which must be included with the individual’s return for the year, must disclose (1) the amounts of the nondeductible contributions for the year, (2) the distributions received from IRAs during the year, (3) the aggregate balance in all of the taxpayer’s IRAs as of year-end, and (4) other information the Treasury might require by regulation. A $50 penalty is assessed for failing without reasonable cause to file the information return. Moreover, because nondeductible contributions are recoverable tax free on distribution, a penalty of $100 is imposed if these contributions are overstated in the return and the taxpayer cannot show reasonable cause for the overstatement.

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

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Jul 23

IRA Financial Group Offers In-House CPA Service for Your Self Directed IRA

IRA Financial Group is the only full service Self-Directed IRA facilitator that offers its clients the ability to consult with our in-house tax accountants and CPAs, in addition, to our tax professions. Our in-house CPAs are specially trained in the taxation of retirement accounts, which allows us to provide our clients with specialized tax advice and offer tax filing and reporting services relating to the use and taxation of retirement funds to make investments. Because the use of retirement funds to make investments, such as real estate via a Self-Directed IRA LLC are governed by a set of multifaceted and not widely known tax rules, having the ability to consult and work directly with specially trained tax professionals and CPAs is crucial.

The Taxation of a Self-Directed IRA LLC

Self-Directed IRA LLC owned by one IRA – Disregarded Entity

Using a Self-Directed IRA LLC to make investments, such as real estate presents many exciting investment and tax deferral opportunities. In general, when a wholly owned IRA LLC, also known as a single member Self-Directed IRA LLC is used to make a retirement account investment, there is generally no Federal Income tax return filing requirements, as the LLC will be treated as a disregarded entity for tax purposes. An LLC is treated as passthrough entity for tax purposes, which means it is not subject to tax. The owner (IRA member) of the LLC would be the party responsible for the payment of tax on the allocated net profits generated by the LLC.

When it comes to the payment of tax, in the case of a single member LLC treated as a disregarded entity for tax purposes, the member (owner) of the LLC, and not the LLC would be responsible for the payment of tax in connection with any net profits generated by the LLC. However, in the case of a single-member Self-Directed IRA LLC, an IRA, which is exempt from tax pursuant to IRC Section 408, is the sole owner of the LLC, not an individual or taxable entity. Hence, since a tax-exempt retirement account is the sole owner of the LLC, in general, no tax is due when making real estate and other passive investments with a Self-Directed IRA LLC.

In addition, most states do not require single member LLC to file a state tax return. However, certain some states do impose certain filing and tax requirements on single-member Self-Directed IRA LLCs. As a result, it is vital to work with specially trained tax professionals and CPAs who can properly advise on all the federal and state tax matters involving using a single-member Self-Directed IRA LLC.

Self-Directed IRA LLC owned by two or more IRAs – Partnership

In the case of an LLC owned by two or more IRA accounts, the LLC would be treated as a partnership for Federal Income tax purposes and as a result an IRS Form 1065, Partnership Return, must be filed with the IRS even though no tax is due at the partnership level. An LLC owned by two or more IRAs is treated as a partnership for tax purposes. Like a single member LLC, multiple-member LLCs are treated as passthrough entities for tax purposes and, thus, are not subject to tax. The owner(s) (IRA member(s)) of the LLC would be the parties responsible for the payment of tax on the allocated net profits generated by the LLC. However, in the case of a multiple-member Self-Directed IRA LLC, two or more IRAs, which are exempt from tax pursuant to IRC Section 408, would be the owners of the LLC, not an individual or taxable entity. Hence, since a tax-exempt retirement account are the sole owners of the LLC, in general, no tax is due when making real estate and other passive investments with a Self-Directed IRA LLC.

In addition, most states require LLCs treated as a partnership for federal income tax purposes to file a partnership return for state purposes. However, in the case of a single member Self-Directed IRA LLC, an IRA, which is exempt from tax pursuant to IRC Section 408 is the sole owner of the LLC, not an individual or taxable entity. Hence, since a tax-exempt retirement account is the sole owner of the LLC, in general, no tax is due when making real estate and other passive investments with a Self-Directed IRA LLC.

However, some states do impose certain filing and tax requirements on multi-member Self-Directed IRA LLCs. As a result, it is vital to work with specialized tax professionals and CPAs who can properly advise you on all the federal and state tax matters involving using a multiple-member Self-Directed IRA LLC.

IRA Financial Group Offers In-House CPA Service for Your Self Directed IRAIn-House CPA Services

The IRA Financial Group has designed a specialized Self-Directed IRA LLC CPA service, which will offer clients the ability to consult with specialized Self-Directed IRA LLC trained CPAs on a wide variety of tax matters concerning the Self-Directed IRA. Below is a list of some of the services offered by our in-house CPAs:

  • Advising clients regarding Federal Income tax matters concerning the use of a Self-Directed IRA LLC
  • Advising clients regarding state Income tax matters concerning the use of a Self-Directed IRA LLC
  • Assisting clients with the completion and filing of any Federal Income tax Partnership returns in connection with a Self-Directed IRA LLC
  • Assisting clients the completion and filing of any state Income tax returns in connection with a Self-Directed IRA LLC
  • Advising clients on the IRS prohibited transaction rules as they pertain to federal and state tax matters involving a Self-Directed IRA transaction
  • Assisting clients regarding any state franchise or income tax matters concerning a Self-Directed IRA LLC investment
  • Advising clients regarding the Unrelated Business Taxable Income (UBTI or UBIT) rules
  • Advising clients regarding the Unrelated Debt Finance Income (UDFI) tax rules
  • Assisting clients the completion and filing of the IRS Form 990-T in connection with a Self-Directed IRA LLC investment that generates UBTI and/or UDFI
  • Assisting clients with the day-to-day accounting and management of the Self-Directed IRA LLC & investments (QuickBooks)
  • Self-Directed IRA valuation services
  • Advising on the federal and state asset & creditor protection rules relating to the use of a Self-Directed IRA LLC

Specialized In-House CPA Service for Real Estate Investors

When it comes to engaging in a real estate transaction with a Self-Directed IRA LLC there are a number of important IRS and tax rules that must be followed. For example, IRC Section 4975 prohibits an IRA owner to engage in a transaction that directly or indirectly benefits him/or her or any other “disqualified person”. A “disqualified person” is defined in IRC Section 4975 as the IRA owner and any of his or her lineal descendants, which include parents, children, spouse, daughter-in-laws, and son-in-laws. In addition, a “disqualified person” is not permitted to provide any services or receive any personal benefit from the Self-Directed IRA LLC investment. Therefore, IRA Financial Group has specially designed a CPA tax service program for Self-Directed IRA investors. The specialized CPA service will offer special federal and state tax advice regarding real estate matters as well will cover federal and state tax reporting and filing obligations. Our specially designed Self-Directed IRA real estate CPA service will also offer clients that ability to work with our in-house CPAs to develop an internal accounting system that could keep track of all IRA LLC related expenses and income in order to be in a position to properly value the Self-Directed IRA LLC’s assets. The Self-Directed IRA real estate CPA service is designed to offer a retirement investor with a more detailed accounting of the activities of the Self-Directed IRA LLC.

The tax professionals and CPAs at the IRA Financial Group are committed to making sure your Self-Directed IRA LLC solution remains in full IRS and state compliance from establishment through investment.

For more information on IRA Financial Group’s in-house CPA services, please contact a Self-Directed IRA expert at 800-472-0646.

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Jul 21

What is a Simplified Employee Pension Plan?

A Simplified Employee Pension (SEP) is a special type of IRA that can be established by your employer or by you, if you are self-employed. Designed for small businesses, SEPs have many of the characteristics of qualified plans but are much simpler to establish and administer.

Any Employer Can Establish a SEP

Under a SEP, each participant has his or her own individual retirement account to which the employer contributes. The contributions are excluded from the participant’s pay and are not taxable until they are distributed from the plan. If you are self-employed you may establish a SEP for yourself, even if you have no employees.

The advantage of a SEP over a regular IRA is that the contribution limits are higher. In general, the contribution can be as much as 25% of your annual compensation, up to a maximum contribution of $53,000.

What is a Simplified Employee Pension Plan?The disadvantage of a SEP from an employer’s standpoint is that an employer that establishes a SEP is required to make contributions on behalf of virtually all employees. Moreover, the employees must be 100% vested at all times. Those can be costly requirements for small employers whose workers often include many short-term part-time employees. In contrast, a 401(k) plan, as well as other qualified plans, can extend the period before an employee is fully vested.

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

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Jul 20

Advantages of the Self Directed Roth IRA LLC

There are many advantages of utilizing a Self-Directed Roth IRA LLC:

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.

Advantages of a Self-Directed Roth IRA LLCSpeed: 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.

Jul 17

How to Invest in Options with a Self Directed IRA

When it comes to making investments with a self-directed IRA LLC, the IRS generally does not tell you what you can invest in, only what you cannot invest in.  The types of investments that are not permitted to be made using retirement funds is outlined in Internal Revenue Code Section 408 and 4975.  These rules are generally known as the “Prohibited Transaction” rules.

In addition, to the Prohibited Transaction rules, the IRS imposes a levy or tax on certain transactions involving IRA funds.  In general, when one uses IRA funds to invest in an active business, such as a restaurant, store, factory that is operated through a passthrough entity such as a Limited Liability Company or Partnership or used nonrecourse financing, such as a nonrecourse loan or margin in a stock or trading account, a percentage of net profits or income generated by that activity could be subject to a tax. The tax imposed is often referred to as Unrelated Business Taxable Income or UBIT or UBTI.  The UBTI rules are generally outlined in Internal Revenue Code Sections 512-514.

How to Invest in Options with a Self Directed IRAThe reason the UBTI tax rules do not impact most retirement investors, is that Internal Revenue Code Section 512(b) provides a general exemption for the following categories of income generated by a retirement account:  dividends, interest, royalties, rental income, and capital gain type transaction,  As a result, since the majority of retirement investors purchase publicly traded company stock, which is exempted from the UBTI tax pursuant to Internal Revenue Code Section 512, the UBTI tax rules are not widely known.

When it comes to investing in options with a self-directed IRA LLC, the question then becomes whether the investment would trigger the UBTI rules. An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date. An option, just like a stock or bond, is a security. It is also a binding contract with strictly defined terms and properties.

According to the IRS , any gain from the lapse or termination of options to buy or sell securities is excluded from unrelated business taxable income. Note – the exclusion is not available if the organization is engaged in the trade or business of writing options or the options are held by the organization as inventory or for sale to customers in the ordinary course of a trade or business. Hence, if option trading is not being done as an active trade or business, then using a self-directed IRA LLC to invest in options would not trigger the UBTI tax rules.

For more information on using a self-directed IRA LLC to invest in options, please contact a tax professional at 800-472-0646.

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Jul 16

How the Self Directed IRA LLC Structure Works

Working with our IRA Experts, establishing a Self-Directed IRA LLC is quick and easy. Our IRA Experts will take care of everything for you. The whole process can be handled by phone, email, fax, or mail. Our expert tax and ERISA professionals are on site greatly reducing the set-up time and cost.

1. Tax-Free Transfer of Funds.

Our IRA Experts will assist you in transferring your retirement funds tax-free from your current custodian to a new FDIC backed/IRS approved Passive Custodian that allows for truly Self Directed IRA investments. With a Self Directed IRA LLC with “checkbook control” you no longer have to pay excessive custodian fees based on account value and transaction fees. Instead, with a “checkbook control” Self-Directed IRA LLC, an FDIC backed IRS approved passive custodian is used. The custodian in the “checkbook control” Self Directed IRA LLC structure is referred to as a “passive” custodian largely because the custodian is not required to approve any IRA related investment and simply serves the passive role of satisfying IRS regulations. By using a Self Directed IRA LLC with “checkbook control” you can take advantage of all the benefits of self-directing your retirement assets without incurring excessive custodian fees and custodian created delays.

What Type of retirement Funds May be Transferred Tax-Free?

  • Traditional IRA
  • Roth IRA
  • SEP
  • SIMPLE
  • 401(k)
  • 403(b)
  • Plans for Self-Employed (Keoghs)
  • ESOPs
  • Money Purchase Pensions Plans

Our IRA Experts will assist you in completing all the necessary custodian documents so your retirement funds are transferred to the new passive custodian quickly and without any tax.

All the Passive Custodians we work with are FDIC backed and IRS approved. Once your custodian has transferred your retirement funds to the Passive Custodian, the Passive Custodian will immediately transfer your funds to your new IRA LLC where you as manager of the LLC will have “Checkbook Control” over those funds.

2. Creation of the Self-Directed IRA LLC:

Our in-house tax professionals will form your customized Self-Directed IRA LLC in the state of your choosing. Typically the LLC is formed where the initial IRA investment will be made. Because your IRA and not you will be the member of the LLC, your state residence is not relevant in determining the state in which your LLC will be formed. In addition, a specially drafted Self-Directed IRA LLC Operating Agreement, which is required, will be drafted by our tax professionals as well a Tax ID# will be acquired as part of the LLC formation process.

Our IRA Experts will consult with you on the formation of the new Self-Directed IRA LLC to assure that the LLC is formed in the appropriate state.

3. Open a local bank account for the LLC

Our tax professionals will provide you with the appropriate LLC documents so you can open your IRA LLC checking account at any bank or credit union of your choice.

4. Transfer of IRA Funds to New LLC Bank Account

You, as IRA owner, will direct the Passive Custodian to transfer the IRA funds to your new Self-Directed IRA LLC bank account. The IRA would then become a member of the Self-Directed IRA LLC.

5. Appointment of Manager of LLC

As the Manager of the Self Directed IRA LLC with “Checkbook Control”, you will have the freedom to make all investment decisions for your Self Directed IRA LLC quickly and without custodian consent. As Manager of the Self Directed IRA LLC, you will be able to write a check or wire money from the LLC bank account to make an Investment.

6. Self-Directed IRA Investment is Made

As manager of the LLC, you will have the authority to make investment on behalf of your IRA LLC. The Investment must be made in the name of your Self Directed IRA LLC. All income and gains generated by your IRA LLC will generally flow back to the IRA tax-free!

Self Directed IRA LLC Structure

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

Chart

For additional information on the advantages of using a Self-Directed IRA LLC with “checkbook control” to make investments, please contact one of our IRA Experts at 800-472-0646.

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Jul 15

Flip Houses with a Self Directed IRA

Since the creation of IRAs back in the early 1970s, the IRS has always permitted an IRA to purchase, hold, or flip real estate.   In fact, it states it right on the IRS website. By using a Self-Directed IRA to buy real estate, you will be able to purchase raw land, domestic or foreign real estate, residential or commercial property, flip homes, and much more tax-free and without requiring custodian consent!

Flipping a Home is as Simple as Writing a Check

With a Self-Directed IRA with checkbook control, flipping homes or engaging in a real estate transaction is as simple as writing a check. As manager of your Self-Directed IRA LLC, you will have the authority to make real estate investment decisions on behalf of your IRA on your own without needing the consent of an IRA custodian. One of the true advantages of a checkbook control IRA is that when you want to purchase a home with your self-directed IRA, you can make the purchase, pay for the improvements, and even sell or flip the property on your own without involving the IRA custodian.  In other words, with a checkbook control IRA LLC, you will have the power to flip homes or do multiple real estate transactions on your own without requiring the consent of a custodian. One additional important advantage of purchasing real estate with a Self-Directed IRA is that all income and gains are tax-deferred until a distribution is taken (Traditional IRA distributions are not required until the IRA owner turns 70 1/2). In the case of a Self-Directed Roth IRA LLC, all gains are tax-free.

Flip a Home without Requiring the Consent of a Custodian

A Self-Directed IRA with checkbook control is the most efficient and cost effective vehicle for doing house flips with retirement funds.  With a Self-Directed IRA with checkbook control, you will be able to use your IRA or 401(k) funds to purchase real estate and engage in flipping homes tax-free and without custodian consent.  A traditional IRA custodian (financial institution) will not allow you to purchase real estate using your IRA or retirement funds.  Therefore, in order to have the ability to engage in house flipping transactions using retirement funds, a Self-Directed IRA LLC with Checkbook Control is the answer.

Flip Houses with a Self Directed IRAControl the Entire House Flipping Transaction

Unlike a conventional Self-Directed IRA which requires custodian consent and requires high custodian fees, a Self-Directed IRA LLC with Checkbook Control will allow you to buy real estate by simply writing a check.  With a traditional custodian controlled self-directed IRA, you will have total control to make a real estate purchase, pay for improvements, and then sell the property without ever talking to the IRA custodian.  Since all your IRA funds will be held at a local bank in the name of the Self-Directed IRA LLC, all you would need to do to engage in a house flipping transaction is write a check straight from the IRA LLC account or simply wire the funds from the IRA LLC bank account.  No longer would you need to ask the IRA custodian for permission or have the IRA custodian sign the real estate transaction documents.  Instead, with a Checkbook Control IRA, as manager of the IRA LLC, you will be able to execute the real estate transaction by simply writing a check.

Use a Self-Directed IRA and Flip a Home Tax-Free

One major advantage of flipping homes with a Self-Directed IRA is that all gains are tax-deferred until a distribution is taken (Traditional IRA distributions are not required until the IRA owner turns 70 1/2). In the case of a Self-Directed Roth IRA LLC, all gains are tax-free. In other words, all gains attributable to the house flipping transaction will flow-back to your IRA LLC tax-free!

IRA Financial Group will take care of setting up your entire Self-Directed IRA LLC “Checkbook Control” structure. The whole process can be handled by phone, email, fax, or mail and typically takes between 7-21 days to complete, the timing largely depending on the state of formation and the custodian holding your retirement funds. Our IRA experts and tax and ERISA professionals are onsite greatly reducing the setup time and cost.

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.

To learn more about the advantages of using a Self-Directed IRA LLC to purchase real estate and flip homes tax-free, please call an IRA Expert at 800-472-0646 or visit www.irafinancialgroup.com.

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