May 26

The Difference Between ROBS and Our Business Financing Solution

The IRS has coined a structure that has been designed as a means for prospective business owners to access accumulated tax-deferred retirement funds in order to cover new business start-up costs as Rollovers as Business Startups, or ROBS. As stated in the IRS’s October 1, 2008 Memorandum and repeatedly affirmed by the IRS, the ROBS structure is legal but has been poorly implemented by a number of the promoters who have been actively marketing the structure. In other words, the IRS has concluded that the ROBS transaction is perfectly legal it has just not been implemented properly from an IRS and ERISA compliance standpoint. In contrast, the IRA Financial Group’s in-house retirement tax professionals have spent the last several years reviewing IRS materials and guidance in order to develop the Business Acquisition & Compliance Solution Structure (“BACSS”), an IRS and ERISA compliant structure for using retirement funds to acquire or invest in a business tax free!

The Difference Between ROBS and Our Business Financing SolutionWhile BACSS involves many of the same features of the ROBS transaction, the core distinction is that BACSS has been carefully developed by retirement tax professionals to include all the necessary elements so that the structure is fully compliant with IRS and ERISA rules and procedures. While our competitors were promoting the ROBS structure, which in many cases failed from a compliance standpoint, the IRA Financial Group’s in-house retirement tax professionals spent the last two years reviewing IRS materials in order to develop an IRS and ERISA compliant structure for using retirement funds to acquire or invest in a business tax free!

The IRA Financial Group’s in-house retirement tax professionals will work closely with you to assure that all IRS and ERISA compliance rules and procedures are carefully followed to ensure the legality of the structure.

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

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May 23

Why Use an LLC for Making Self-Directed IRA Investments?

A Limited Liability Company (LLC) is a company that has option to be taxed as a partnership, this is beneficial because the LLC won’t pay any taxes on gains, and instead it will be the owner of the LLC who is liable for any taxes just as if they earned the money themselves. Because the owner of the LLC is your Self-Directed IRA (the IRA owner is the manager), there are no taxes unless you are running a business that is unrelated to the purpose of an IRA (making investments), using debt financing or taking a distribution from your IRA. In addition, the LLC offers limited liability and asset protection with respect to the assets of the IRA.

To see what kind of investments can be made with a Self-Directed IRA, please check out this page.

Why Use an LLC for Making Self-Directed IRA Investments?

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

May 20

Self-Directed IRA For Private Investments Funds

The Internal Revenue Code does not describe what a Self-Directed IRA can invest in, only what it cannot invest in. Internal Revenue Code Sections 408 & 4975 prohibits Disqualified Persons from engaging in certain type of transactions. The purpose of these rules is to encourage the use of IRAs for accumulation of retirement savings and to prohibit those in control of IRAs from taking advantage of the tax benefits for their personal account.

When it comes to using retirement funds to invest in an investment fund, such as a hedge fund, it is important to be mindful of the IRS prohibited transaction rules under Internal Revenue Code Section 4975. In general, the IRS has restricted certain transactions between the IRA and a “disqualified person”. 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 (i.e. parents, children, spouse, daughter-in-law, or son-in-law), and entities in which the IRA holder or a disqualified person holds a controlling or management interest. Furthermore, Internal Revenue Code Section 4975(c)(1)(D) and (E) outlines rules that relate to self-dealing or conflict of interest transactions that involves an investment that could directly or indirectly personally benefit a disqualified person. The self-dealing or conflict of interest prohibited transaction rules have the broadest application especially when it comes to hedge fund type investments.

A hedge fund is an alternative investment vehicle available only to sophisticated investors, such as institutions and individuals with significant assets. In general, retirement funds are permitted to invest in hedge funds. The prohibited transactions rules tend to become more of an issue when the person using the IRA funds or any disqualified person related to the IRA owner has a personal interest or relationship with the hedge fund investment. In other words, an IRA can generally make an investment into a hedge fund in which neither the IRA holder nor any disqualified person has any personal ownership or relationship with. The issues begin to arise from an IRS prohibited transaction standpoint when the IRA owner wishes to use retirement funds to invest in a hedge fund where her or she or a disqualified person is either an owner, employee or, in some cases, has a professional relationship with the fund in question.

In general, if structured correctly, there may be a way for one to use their retirement funds to invest in a hedge fund that one is personally involved in. The key is to make sure that the IRA investment into the investment fund will not directly or indirectly personally benefit the IRA owners since that type of investment would likely trigger a prohibited transaction.

Self-Directed IRA For Private Investments Funds Generally, hedge funds are structured as limited partnerships or LLCs. In the case of a limited partnership, a general partner (“GP”) is created that tends to perform all the hedge fund management tasks. The GP generally owns a small percentage of the partnership. The investors are limited partners (“LP”) of the partnership. A typical fee structure for a hedge fund is the 2 and 20 model, which means the hedge fund manager will take a 2% management fee of all assets under management and then take 20% of the profits generated by the fund after the LP investors have received their money they invested back and, in some cases, a preferred return on the money invested is also returned to the investor.

A popular question is whether an individual who is a principal or in a management position with the hedge fund can use their retirement funds to invest in the fund. To begin with, the use of the retirement funds cannot be invested into the GP entity since that is the entity where the services are generally being performed on behalf of the hedge fund and where the management fee and carried interest are typically being directed as investing IRA funds into a company where the IRA holder has a personal ownership or is performing services as an employee would likely violate the IRS prohibited transaction rules. Therefore, the question then becomes can the IRA holder who has some personal ownership in the hedge fund use retirement funds to invest as an LP of the fund? The answer generally depends on the facts and circumstances involved in the transaction.

It is advisable to consult with a tax attorney or tax professional before using a Self-Directed IRA to invest in an investment fund, such as a hedge fund.

To learn more about using a Self-Directed IRA to invest in an investment fund, please contact a Self-Directed retirement expert at 1-800-472-1043.

May 17

Selecting a Great IRA

Here’s another great article from usnews.com about selecting an IRA:

Outside of saving for retirement through employer plans, which include pensions, 401(k)s, 403(b)s and 457 plans, individual retirement accounts are your most effective tax-advantaged savings tool. These accounts were created in 1974, and designed to allow individuals who do not have access to pensions to save for retirement.

IRAs started out simple. You could contribute up to 15 percent of your pay (or a maximum of $1,500 per year), receive a deduction on your tax return and allow the account to grow without incurring annual taxes. Then, when you pulled money out of the account in the future, you would pay ordinary income tax on the withdrawals.

But a lot has changed with IRAs. Since the 1970s, the IRA has evolved in complexity, and deciding which version is the best fit for your retirement savings plan has become more complex. Here’s a guide to the different IRAs, and how to maximize their benefits.

Traditional IRA. As the name implies, the traditional IRA is the most similar to the original design. Depending on your income, you may qualify for a tax deduction. For 2016, if you are covered under a workplace retirement plan, the deduction phases out for couples whose modified adjusted gross income is between $98,000 and $118,000 ($61,000 to $71,000 for individuals). If you are not covered, but your spouse is, the income limit increases to $184,000 to $194,000 in 2016.

Planning opportunity. IRAs can be used by people who don’t have a workplace retirement account or individuals who have maxed out all their other tax-advantaged savings opportunities. Traditional IRAs can also be used by individuals hoping to fund Roth IRAs, even though their income exceeds the Roth contribution limits, via a Roth conversion strategy.

Limits. The current funding limit for a traditional IRA is $5,500 for those under 50 and $6,500 for people age 50 and over.

Rollover IRA. The average baby boomer held nearly 12 jobs by age 50, according to the Bureau of Labor Statistics. This means you are likely to participate in quite a few retirement accounts at various employers. A rollover IRA is a traditional IRA that is used to consolidate old retirement accounts.

Planning opportunity. Not all retirement plans are created equally. You may have left assets in an old employer plan that has high fees, expensive funds and limited investment options. Once you have a separation in service you can take those assets and invest them with a low cost IRA provider. It also makes your financial life easier to consolidate accounts.

Inherited IRA. If you are the beneficiary of an IRA and not the spouse of the deceased person, you will need to open an inherited IRA. This allows the assets of the person who died to pass to you while maintaining their tax-advantaged status. Inherited IRAs operate differently than regular IRAs, and the passing of the assets usually triggers (or continues) the processing of required minimum distributions.

Planning opportunity. These IRAs provide the opportunity to stretch out the benefit of tax deferred growth since required minimum distributions can now be based upon the life expectancy of the beneficiary rather than that of the deceased. It may be beneficial to seek professional guidance from either a financial advisor or accountant to make sure the required distributions are correctly processed moving forward.

Roth IRA. The Roth IRA came about in 1997. Rather than getting a tax deduction on your current return, contributions made to a Roth IRA go in after-tax. But the account grows tax-deferred, just like a traditional IRA. And, assuming certain requirements are met – you must be age 59 1/2 and have an account that is at least 5 years old – the money can be withdrawn tax free.

Planning opportunity. Roth IRAs are a tremendous saving opportunity for younger individuals and individuals in low tax brackets. If you feel you will be in a higher tax bracket in retirement than you are now, growing Roth assets is likely to be a smart strategy. Roth IRAs are not subject to required minimum distributions, which can provide for additional tax savings and estate planning opportunities later in life.

Limits. The current funding limits for a Roth IRA are $5,500 for those under 50 and $6,500 for those 50 and over. The ability to contribute to Roth IRAs phases out for single tax filers with a modified adjusted gross income of $117,000 to $132,000 and married filers with between $184,000 and $194,000 in 2016.

Honorable Mentions:

SEP IRA. A simplified employee pension IRA is an employer-sponsored plan that can be set up for businesses of any size, including sole-proprietors, partnerships or companies with a number of employees. All contributions to the plan are made by the employer. These plans usually make the most sense for self-employed business owners.

SIMPLE IRA. A savings incentive match plan for employees is an employer-sponsored retirement plan that allows both employees and employers to contribute on the employee’s behalf. This plan is most suitable for small businesses with fewer than 100 employees. The current limit an employee may contribute through salary deferral contributions is $12,500 for those under 50 years old and $15,500 for those over 50.

Coverdell education savings account. This is a tax-advantaged plan that can be established for individuals under age 18 that allows parents to save for qualified primary and secondary education expenses. The maximum amount that can be contributed to an ESA is $2,000 per year. You can’t deduct contributions to a Coverdell ESA on you tax return, but the money grows without taxation until you withdraw it and is tax-free when used to pay for qualifying education costs. There are two benefits that Coverdell ESAs offer over 529 college savings plans: ESAs can be used for private kindergarten through grade 12 education, and they have less restricted investment opportunities.

Retirement savers have many types of IRAs to choose from. Understanding the benefits each type of IRA provides allows you to select the retirement account that will help you to best reach your financial goals.

If you have any questions or are looking to open an IRA, please contact an IRA Expert at the IRA Financial Group @ 800.472.0646.

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May 16

New Podcast – How to use a Self-Directed IRA to Make Peer-to-Peer Lending Investments

IRA Financial Group’s Adam Bergman discusses how you can use your Self-Directed IRA to make Peer-to-Peer Lending Investments and tips for doing it the right way.

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Click Here to Listen

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May 12

Rules of the Real Estate Roth IRA

A Self-Directed Roth 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 basis of the prohibited transaction rules are based on the premise that investments involving Roth 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 Roth IRA and certain individuals known as “disqualified persons”. 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 Roth IRA holder, any ancestors or lineal descendants of the Roth IRA holder, and entities in which the Roth IRA holder holds a controlling equity or management interest.

Rules of the Real Estate Roth IRAThe IRS permits using a Self-Directed Roth IRA LLC to purchase real estate or raw land. Since you are the manager of the Self-Directed Roth IRA LLC, making a real estate investment is as simple as writing a check from your Self-Directed Roth IRA bank account. The advantage of purchasing real estate with your Self-Directed Roth IRA LLC is that all income and gains are tax-free, assuming the Roth IRA has been opened for 5 years and the Roth IRA holder is over the age of 591/2 when the distribution is taken.

For example, if you purchased a piece of property with your Self-Directed Roth IRA LLC for $100,000 and you later sold the property for $300,000, the $200,000 of gain appreciation would generally be tax-free. 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.

When it comes to using a self-directed Roth IRA to purchase real estate, there are a number of rules that should be followed in order to make sure the real estate Roth IRA investment does not violate any of the IRS prohibited transaction rules.

  • The deposit and purchase price for the real estate property should be paid using Self-Directed Roth 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 Roth 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 Roth 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.
  • The Roth IRA holder or “disqualified person” in connection with the real estate investment should perform no services in connection with the use of self-directed IRA LLC. In general, other than standard management type of services (necessary and required tasks in connection with the maintenance of the LLC), no active services should be performed by the LLC manager 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 Roth IRA LLC. For example, if Joe Smith established a Self-Directed Roth IRA LLC and named the LLC XYZ, LLC, title to real estate purchased by Joe’s Self-Directed Roth IRA LLC would be as follows: XYZ LLC
  • Although the use of a nonrecourse loan is permitted with a self-directed Roth IRA when buying real estate, the use of a nonrecourse loan would impose a tax pursuant to IRC 514 on a percentage of the income generated by the Roth IRA investment based off a percentage of the debt used in proportion to the amount of cash invested. This tax is especially difficult in the case of a Roth IRA, which generally offers tax-free income and gains.
  • Keep good records of income and expenses generated by the real estate investment
  • All income, gains or losses from the Self-Directed Roth IRA LLC real estate investment should be allocated to the IRA and be returned to the Roth IRA LLC bank account
  • 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”
  • If you need to make additional Roth IRA contributions to your self-directed IRA, the contribution should be made to the Roth IRA custodian/administrator and then the funds will be transferred to the Roth IRA LLC.

Using a self-directed Roth IRA LLC to buy real estate is quick and easy, however, there are a number of IRS rules and potential tax issues that must be addressed before making the self-directed IRA real estate investment.

For more information on using a self-directed Roth IRA LLC to buy real estate, please contact a tax professional at 800-472-0646.

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May 10

IRA Financial Group Announces Low Cost-Directed IRA Solution for Peer to Peer Lending

Specially designed Self-directed IRA LLC structure for peer-to-peer lending to help increase efficiency and reduce transaction costs

IRA Financial Group, the leading provider of self-directed IRA LLC and solo 401(k) plan solutions, announces a new low cost self-directed IRA LLC solution for peer to peer lending platforms. The newly designed self-directed IRA LLC solution for peer to peer lending investors will allow investors to make loans from a local LLC bank account and circumvent any IRA custodian transaction or annual account valuation fees. “As a result of the strong demand from peer to peer lenders looking to have more control over the loan process and reduce annual fees, we have developed a special self-directed IRA LLC solution specifically designed for peer to peer lenders,” stated Amy Murphy, a self-directed retirement specialist with the IRA Financial Group.

The main advantage of using a Self Directed IRA LLC to make peer-to peer lending investments is that the loan can be made by simply writing a check. In addition, all income and gains associated with the self directed IRA hard money loan would grow tax-deferred.

With IRA Financial Group’s self directed IRA peer to peer lending solution, traditional IRA or Roth IRA funds can be used to make secured or unsecured private loans to small business owners or home builders.

IRA Financial Group Announces Low Cost-Directed IRA Solution for Peer to Peer LendingIRA Financial Group’s Self-Directed IRA for hard money investors, is an IRS approved structure that allows one to use their retirement funds to make hard money loans, either secured or unsecured, to any non-disqualified third-party by simply writing a check. 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 peer to peer loans loans by simply writing a check

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

IRA Financial Group is the market’s leading provider of “checkbook control” 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.

IRA Financial Group proudly announces the latest book titled “The Checkbook IRA” written by tax partner Adam Bergman, which is now available on Amazon. This is the second book in a four-part series on self-directed retirement plans. The first book “Going Solo” is also available on Amazon.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646. To learn more about establishing a self-directed IRA account with the IRA Financial Trust Company please visit http://www.irafinancialtrust.com or call 800-472-1043.

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May 03

Can I Make Multiple Investments Using my Self-Directed IRA Funds?

Yes. You are permitted to make multiple investments with your Self Directed IRA LLC as long as they are not prohibited transactions. For example, you can use a portion of your IRA funds to purchase real estate and use another portion to buy mutual funds.  With IRA Financial Group’s “Checkbook Control” Self-Directed IRA LLC, you are only limited by your imagination.

For a list of types of investments you can make, please click here.

Can I Make Multiple Investments Using my Self-Directed IRA Funds?

Please contact one of our Self Directed IRA Experts at 800-472-0646 for more information.
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May 02

How Do You Decide Between A Traditional IRA And A Roth IRA?

There’s no right or wrong answer. The decision usually depends on a variety of factors and circumstances.

If you are not eligible to take advantage of tax-deductible contributions to a traditional IRA but qualify for after-tax contributions to a Roth IRA, then the Roth IRA is the better choice. Roth IRA contributions are made in after-tax dollars, while earnings are usually not taxable.

If contributions to a traditional IRA are tax deductible and you are also eligible to contribute to a Roth IRA, here are some considerations in making your decision:

  • If you expect your retirement tax rate to be equal or higher than it is today, a Roth IRA could yield the greatest benefit.
  • If you expect your retirement tax rate to be much lower than it is today, you may want to choose to make contributions to a traditional IRA.
  • If you expect your investment to generate strong returns, then a Roth IRA could be a better option.

Finally, if you are younger, the Roth IRA is more attractive because you will have more time to grow your retirement without paying any tax.

Essentially there are three different types of Self-Directed IRAs, each providing the IRA holder with different levels of investment and control options:

  1. Traditional financial institution Self-Directed IRA
  2. Custodian-controlled Self-Directed IRA without Checkbook Control
  3. Self-Directed IRA LLC with Checkbook Control

For more information, please contact an IRA Expert @ 800.472.0646.

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Apr 28

IRA Financial Group Announces Special Self-Directed IRA Solution for Hard Money Lenders

Self-directed IRA LLC structure can to generate strong tax-deferred or tax-free returns for hard money lenders

IRA Financial Group, the leading provider of self-directed IRA LLC and solo 401(k) plan solutions, announces a specially designed self-directed IRA LLC solution for hard money lenders looking to generate tax-deferred or tax-free returns. Because most financial institutions continue to require solid credit scores and spend weeks reviewing financial statements, tax returns and business plans, there is a growing need for quick financing for many individuals, small business and investors, especially real estate developers and builders for their real estate projects. As a result, IRA Financial Group has partnered with the IRA Financial Trust Company to design a special checkbook control self-directed IRA LLC program designed specifically for hard money lenders.

“Due to the strong demand from hard money lenders to have more control over the loan process, we have developed a special self-directed IRA LLC solution specifically tailored for the hard money lender investor,” stated Jacky Ospina, a self-directed retirement specialist with the IRA Financial Group. “Due to the very limited amount of financing available to most individuals and small businesses, many hard money lenders are eager to use their IRA or 401(k) funds to make loans and generate tax-deferred income or gains,“ stated Ms. Ospina.

The main advantage of using a Self Directed IRA LLC to make hard money loans is that the loan can be made by simply writing a check. In addition, all income and gains associated with the self directed IRA hard money loan would grow tax-deferred.

With IRA Financial Group’s self directed IRA hard money lending solution, traditional IRA or Roth IRA funds can be used to make secured or unsecured private loans to small business owners or home builders.

IRA Financial Group Announces Special Self-Directed IRA Solution for Hard Money LendersIRA Financial Group’s Self-Directed IRA investments for hard money investors, is an IRS approved structure that allows one to use their retirement funds to make hard money loans, either secured or unsecured, to any non-disqualified third-party by simply writing a check. The Self-Directed IRA LLC involves the establishment of a limited liability company (“LLC”) that is owned by the IRA (care of the Roth 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 hard money loans by simply writing a check

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

IRA Financial Group is the market’s leading provider of “checkbook control” 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.

IRA Financial Group proudly announces the latest book titled “The Checkbook IRA” written by tax partner Adam Bergman, which is now available on Amazon. This is the second book in a four-part series on self-directed retirement plans. The first book “Going Solo” is also available on Amazon.

To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com or call 800-472-0646. To learn more about establishing a self-directed IRA account with the IRA Financial Trust Company please visit http://www.irafinancialtrust.com or call 800-472-1043.

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