Apr 18

IRA Financial Group Introduces Tax-Free Solution For Investing in Real Estate – The Self-Directed Roth IRA

Self-Directed Roth IRA LLC real estate solution allows for tax-free real estate investing

IRA Financial Group, the leading provider of self-directed Roth IRA LLC solutions introduces an IRS approved solution for investing in real estate tax-free with retirement funds. IRA Financial Group’s “checkbook control” self directed Roth IRA LLC offers one the ability to use his or her retirement funds to make almost any type of real estate investment on their own without requiring the consent of any custodian or person, including real estate without tax or penalty. The IRS only describes the type of investments that are prohibited, which are very few. “ Our self-directed Roth IRA real estate solution is the ultimate tax shelter for real estate investors, “ stated Adam Bergman, a tax partner with the IRA Financial Group.

IRA Financial Group’s Self-Directed Roth IRA LLC 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 Roth IRA LLC involves the establishment of a limited liability company (“LLC”) that is owned by the Roth IRA (care of the Roth IRA custodian) and managed by the Roth IRA holder or any third-party. As manager of the Roth IRA LLC, the Roth IRA owner will have control over the Roth IRA assets to make the investments he or she wants and understand – not just investments forced upon you by Wall Street.

The IRS has always permitted a Roth IRA to purchase real estate, raw land, or flip homes. “With IRA Financial Group’s self-directed Roth IRA LLC solution, investors can make real estate purchases and IRA Financial Group Introduces Tax-Free Solution For Investing in Real Estate – The Self-Directed Roth IRAgenerate income and gains without ever paying tax stated Mr. Bergman. “A growing number of clients are realizing that using self directed Roth IRA to make investments will become far more tax efficient than in prior years due to the increasing income tax rates, stated Jacky Ospina, a retirement tax specialist with the IRA Financial Group. One major advantage of buying rental properties with a Self-Directed Roth IRA is that all rental income generated by the property is tax-free until a distribution is taken.

Instead of buying real estate with personal funds and being subject to tax on the income or upon the disposition of the asset, a Self Directed Roth IRA real estate LLC with Checkbook Control will allow one to buy real estate, including rental properties without paying tax immediately. With a self-directed real estate Roth IRA, all income and gains generated by the IRA LLC investment will flow back to the IRA tax-free

Adam Bergman, a tax partner with the IRA Financial Group, expands on the benefits of using a self-directed Roth IRA LLC with checkbook control to make investments, ”By using retirement funds to make investments, retirement investors will have the ability to generate income or gains without ever paying tax.” “Using a Self-Directed Roth IRA allows one to take advantage of the best remaining legal tax shelter.” Stated Mr. Bergman.

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 Facilitator. 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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Apr 17

Investing in Real Estate with a Self-Directed IRA

Most people mistakenly believe that their IRA must be invested in bank CDs, the stock market, or mutual funds. Few Investors realize that the IRS has always permitted real estate to be held inside IRA retirement accounts. Investments in real estate with a Self-Directed IRA LLC are fully permissible under the Employee Retirement Income Security Act of 1974 (ERISA). IRS rules permit you to engage in almost any type of real estate investment, aside generally from any investment involving a disqualified person.

In addition, the IRS states the following on their website: “…..IRA law does not prohibit investing in real estate but trustees are not required to offer real estate as an option.”

Advantages of Using a Self-Directed IRA LLC to Purchase Real Estate

Income or gains generated by an IRA generate tax-deferred/tax-free profits. Using a Self-Directed IRA LLC to purchase real estate Using a Self Directed IRA LLC To Purchase Real Estateallows the IRA to earn tax-free income/gains and pay taxes at a future date (in the case of a Roth IRA the income/gains are always tax-free), rather than in the year the investment produces income.

With a Self-Directed IRA LLC, you can invest tax-free and not have to pay taxes right away – or in the case of a Roth IRA – ever! All the income or gains from your real estate deals flow through to your IRA tax-free!

Why Buy Real Estate Using a Self-Directed IRA LLC

  • Gains are tax free
  • Positive cash flow is tax free
  • No time limit for holding property
  • IRA can borrow money – Leverage your investment with non-recourse financing
  • Potential to earn a larger rate of return on invested capital

Tax Advantages of Buying Real estate with a Self-Directed IRA LLC

When purchasing real estate with a Self-Directed IRA LLC, in general, all income and gains generated by your pre-tax retirement account investment would generally flow back into the retirement account tax-free. Instead of paying tax on the returns of a real estate investment, tax is paid only at a later date, leaving the real estate investment to grow unhindered. Generally, self-directed IRA real estate investments are usually made when a person is earning higher income and is taxed at a higher tax rate. Withdrawals are made from an investment account when a person is earning little or no income and is taxed at a lower rate.

For example, if Joe established a Self-Directed IRA LLC with $100,000 to purchase real estate and make other investments. Assume Joe kept his Self-Directed IRA LLC open for 20 years. Further assume that Joe was able to generate an average annual pre-tax rate of return of 8% and the average tax rate was 25%. By using a tax-deferred Self-Directed IRA LLC strategy, after 20 years Joe’s $100,000 investment would be worth $466,098 – a whopping $349,572 after taxes on the earnings. Whereas, if Joe made the investments with taxable funds (non-retirement funds) Joe would have only accumulated $320,714 after 20 years.

Types of Real Estate Investments

Below is a partial list of domestic or foreign real estate-related investments that you can make with a Self-Directed IRA LLC:

  • Raw land
  • Residential homes
  • Commercial property
  • Apartments
  • Duplexes
  • Condos/town-homes
  • Mobile homes
  • Real estate notes
  • Real estate purchase options
  • Tax liens certificates
  • Tax deeds

Investing in Real Estate with a Self-Directed IRA LLC is Quick & Easy!

Purchasing real estate with a Self-Directed IRA LLC is essentially the same as purchasing real estate personally.

  • Set-up a Self-Directed IRA LLC with the IRA Financial GroupSelf Directed IRA LLC
  • Identify the investment property
  • Purchase the investment property with the Self-Directed IRA LLC – no need to seek the consent of the custodian with a Self-Directed IRA LLC with “Checkbook Control
  • Title to the investment property and all transaction documents should be in the name of the Self-Directed IRA LLC. Documents pertaining to the property investment must be signed by the LLC manager
  • All expenses paid from the investment property go through the Self-Directed IRA LLC. Likewise, all rental income checks must be deposited directly in to the Self-Directed IRA LLC bank account. No IRA related investment checks should be deposited into your personal accounts.
  • All income or gains from the investment flow through to the IRA tax-free!

Structuring the Purchase of Real Estate with a Self-Directed IRA LLC

When using a Self-Directed IRA LLC to make a real estate investment there are a number of ways you can structure the transaction:

1. Use your Self-Directed IRA LLC funds to make 100% of the investment

If you have enough funds in your Self-Directed IRA LLC to cover the entire real estate purchase, including closing costs, taxes, fees, insurance, you may make the purchase outright using your Self-Directed IRA LLC. All ongoing expenses relating to the real estate investment must be paid out of your Self-Directed IRA LLC bank account. In addition, all income or gains relating to your real estate investment must be returned to your Self-Directed IRA LLC bank account.

2. Partner with Family, Friends, Colleagues

If you don’t have sufficient funds in your Self-Directed IRA LLC to make a real estate purchase outright, your Self-Directed IRA LLC can purchase an interest in the property along with a family, friend, or colleague. The investment would not be made into an entity owned by the IRA owner, but instead would be invested directly into the property.

For example, your Self-Directed IRA LLC could partner with a family member, friend, or colleague to purchase a piece of property for $150,000. Your Self-Directed IRA LLC could purchase an interest in the property (i.e. 50% for $75,000) and your family member, friend, or colleague could purchase the remaining interest (i.e. 50% for $75,000).

All income or gain from the property would be allocated to the parties in relation to their percentage of ownership in the property. Likewise, all property expenses must be paid in relation to the parties’ percentage of ownership in the property. Based on the above example, for a $2,000 property tax bill, the Self-Directed IRA LLC would be responsible for 50% of the bill ($1000) and the family member, friend, or colleague would be responsible for the remaining $1000 (50%).

Isn’t Partnering with a family member in a Real Estate Transaction a Prohibited Transaction?

Likely not if the transaction is structured correctly. Investing in an investment entity with a family member and investing in an investment property directly are two different transaction structures that impact whether the transaction will be prohibited under Code Section 4975. The different tax treatment is based on who currently owns the investment. Using a Self-Directed IRA LLC to invest in an entity that is owned by a family member who is a disqualified person will likely be treated as a prohibited transaction. However, partnering with a family member that is a non-disqualified person directly into an investment property would likely not be a prohibited transaction. Note: If you, a family member, or other disqualified person already owns a property, then investing in that property with your Self-Directed IRA LLC would be prohibited.

3. Borrow Money for your Self-Directed IRA LLC

You may obtain financing through a loan or mortgage to finance a real estate purchase using a Self-Directed IRA LLC. However, two important points must be considered when selecting this option:

  • Loan must be non-recourse – A “prohibited transaction” is a transaction that, directly or indirectly involves the loan of money or other extension of credit between a plan and a disqualified person. Normally, when an individual purchases real estate with a mortgage, the traditional loan provides for recourse against the borrower (i.e., personal liability for the mortgage). However, if the IRA purchases real estate and secures a mortgage for the purchase, the loan must be non-recourse; otherwise there will be a prohibited transaction. A non-recourse loan only uses the property for collateral. In the event of default, the lender can collect only the property and cannot go after the IRA itself.
  • Tax is due on profits from leveraged real estate – Pursuant to Code Section 514, if your Self-Directed IRA LLC uses non-recourse debt financing (i.e., a loan) on a real estate investment, some portion of each item of gross income from the property are subject to Unrelated Business Income Tax (UBTI). “Debt-financed property” refers to borrowing money to purchase the real estate (i.e., a leveraged asset that is held to produce income). In such cases, only the income attributable to the financed portion of the property is taxed; gain on the profit from the sale of the leveraged assets is also UDFI (unless the debt is paid off more than 12 months before the property is sold). There are some important exceptions from UBTI: those exclusions relate to the central importance of investment in real estate – dividends, interest, annuities, royalties, most rentals from real estate, and gains/losses from the sale of real estate. However, rental income generated from real estate that is “debt financed” loses the exclusion, and that portion of the income becomes subject to UBTI. Thus, if the IRA borrows money to finance the purchase of real estate, the portion of the rental income attributable to that debt will be taxable as UBTI.

For example, if the average acquisition indebtedness is $50 and the average adjusted basis is $100, 50 percent of each item of gross income from the property is included in UBTI.

A Self-Directed IRA LLC subject to UBTI is taxed at the trust tax rate because an IRA is considered a trust. For 2011, a Self-Directed IRA LLC subject to UBTI is taxed at the following rates:

  • $0 – $2,300 = 15%
  • $2,300 – $5,350 = $345 + 25%
  • $5,350 – $8,200 = $1,107.50 + 28%
  • $8200 – $11,200 = $1,905.50 + 33%
  • Over $11,200 = $2,895.50 + 35%

Why Work With the IRA Financial Group?

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. Over the years, we have helped thousands of clients establish IRS compliant Self-Directed IRA LLC solutions. With our work experience at some of the largest law firms in the country, our retirement tax professionals’ tax and real estate IRA knowledge in this area is unmatched.

To learn more about using a Self-Directed IRA LLC to invest in real estate, please contact one of our Self-Directed IRA Experts at 800-472-0646 for more information.

Apr 14

How the Self Directed Roth IRA Works

Making an investment through a Self-Directed IRA LLC can be done in a few easy steps:

1. Set up a Self-Directed Roth IRA LLC.

With IRA Financial Group, you no longer have to spend $2000 to $5,000 or more to set up your Self-Directed Roth IRA LLC.

We provide the following all for one low price

  • Free tax consultation with our in-house retirement tax professionals
  • Setup your LLC in the State of your choice
  • Prepare and file the Articles of Organization with the State
  • Generate a special purpose, attorney-reviewed Self-Directed Roth IRA LLC Operating Agreement
  • Generate a special purpose, attorney-reviewed Subscription Agreement, as required by the Custodian
  • Obtain the EIN from the IRS
  • Co-ordinate setup with the Custodian of your Choice
  • Free tax and IRA support regarding the Self-Directed Roth IRA LLC Structure
  • Expedited Service Guarantee!
  • Satisfaction Guaranteed!

a Self Directed Roth IRA offers many benefitsThe IRA Financial Group will take care of the entire setup of your Self-Directed Roth 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. Most importantly, each client of the IRA Financial Group is assigned a retirement tax professionals to help with the establishment of the Self-Directed Roth IRA LLC “Checkbook Control” structure. You will find that our fee for this service is significantly less than other companies that perform the same or similar services.

2. Transfer of Retirement Funds Tax-Free.

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, such as real estate, tax liens, precious metals, and much, much more.

What is a Passive Custodian?

The IRS approved and FDIC backed 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. The passive custodian business model is built around the establishment and maintenance of IRAs, whereas a traditional IRA custodian generates income through the marketing and sale of investment products.

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 the funds.

With a Self-Directed Roth 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 Roth IRA LLC, an FDIC backed IRS approved passive custodian is used. By using a Self-Directed Roth 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.

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.

3. Open IRA LLC Bank Account.

Open a local bank account for the LLC at any bank of your choice. You can open a bank account for your Self-Directed IRA LLC at any bank or credit union.

4. Tax-Free Transfer of Funds to LLC Bank Account.

Direct the passive custodian to transfer the IRA funds to your new Self-Directed Roth IRA LLC bank account. The IRA LLC checking account can be opened at any bank or credit union.

5. “Checkbook Control”.

As the Manager of the Self-Directed Roth IRA LLC, you will have the freedom to make all investment decisions for your Self-Directed Roth IRA LLC. In other words, you will have “checkbook control” over your IRA funds allowing you to make an IRA investment by simply writing a check or wiring funds directly from the IRA LLC bank account.

6. Tax-Free Investing.

Since your IRA will become the owner(s) (member(s)) of the newly formed IRA LLC, all income and gains generated by an IRA LLC investment will generally flow back to your IRA tax-free. With a Self-Directed Roth IRA LLC, 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.

Because an LLC is treated as a pass-through entity for federal income tax purposes, all income and gains are taxed at the owner level not at the entity level. However, since an IRA is a tax-exempt party pursuant to Internal Revenue Code Section 408 and, thus, does not pay federal income tax, all IRA investment income and gains will generally flow through to the IRA tax-free!

The IRA Financial Group will take care of the entire setup of your Self-Directed Roth 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. Most importantly, each client of the IRA Financial Group is assigned a retirement tax professionals to help with the establishment of the Self-Directed Roth IRA LLC “Checkbook Control” structure. You will find that our fee for this service is significantly less than other companies that perform the same or similar services.

For more information about the Self-Directed Roth IRA LLC, please contact an IRA Expert @ 800.472.0646 today!

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Apr 11

The Advantages of the ROBS Solution vs. the Self-Directed IRA to Buy a Business with IRA or 401k Funds

The Business Acquisition & Compliance Solution Structure (BACSS) also known as the “Rollover Business Start-Up” (“ROBS”) Solution is an IRS and ERISA approved structure that allows an individual to purchase a new or existing business with retirement funds and be active in the business without triggering any of the IRS prohibited transaction rules. The ROBS solution qualifies for a special exemption set forth under IRC 4975(d) to certain prohibited transaction rules, which do not apply to a Self-Directed IRA structure.

How Does the ROBS structure work?

The ROBS arrangement typically involves rolling over a prior IRA or 401(k) plan account into a newly established 401(k) plan, which a start-up C Corporation business sponsored, and then investing the rollover 401(k) Plan funds in the stock of the new C Corporation. The funds are then deposited in the C Corporation bank account and are available for use for business purposes.

The following is how a typical ROBS structure works:

  • 1. Jim, an entrepreneur or existing business owner, establishes a new C Corporation in the state where the business will be operating. The ROBS structure must involve a C Corporation and not an LLC or S Corporation because the exemption to the IRS prohibited transaction rules under IRC 4975(d) involves the purchase of “Qualifying Employer Securities”, which is defined as stock of a Corporation. Using an LLC would not satisfy this definition and only individuals can be shareholders of an S Corporation and a 401(k) Plan is a trust.
  • 2. The new C Corporation adopts a prototype 401(k) plan that specifically permits the plan participants, including Jim, to direct the investment of their plan accounts into a selection of investments options, including employer stock, also known as “qualifying employer securities.
  • 3. Jim elects to participate in the new 401(k) plan and, as permitted by the plan, directs a rollover of a prior employer’s 401(k) Plan funds into the newly adopted 401(k) plan.
  • 4. Jim then directs the investment of his or her 401(k) plan account to purchase the C Corporation’s newly issued stock at fair market value (i.e., the amount that Jim wishes to invest in the new business).
  • 5. Jim also invests personal funds equal to more than 1% of the purchase price so that the structure is not considered an Employee Stock Option Plan (ESOP).
  • 6. The C Corporation utilizes the proceeds from the sale of stock (the amount of rollover funds and personal funds used) to purchase the assets for the new business.
  • 7. Joe would be able to earn a salary from the revenues of the business as well as personally guarantee any business loan.

What is the Difference between using a Self-Directed Vs. ROBS structure to buy a business?

In a lot of respects, using a Self-Directed IRA LLC or a 401(k) Plan to purchase stock in a corporation would seem to be subject to the same rules. However, as described above, using 401(k) Plan funds and not IRA funds allows one to take advantage of the prohibited transaction exemption under IRC 4975(d) for “Qualifying Employer Securities.”

The recent U.S. Tax Court case Peek v. Commissioner, 140 T.C. No. 12 (May 9, 2013), highlights the risk and limitations involved when using a Self-Directed IRA to purchase business assets. In the Peek case, the taxpayers used IRA funds to invest in a corporation that ultimately purchased business assets. Because Mr. Peek used an IRA and not a 401(k) Plan to purchase the C Corporation stock, Mr. Peek was not able to earn a salary or personally guarantee a business loan, which ultimately was the cause of the IRS prohibited transaction rule violation.

The limitation of using a Self-Directed IRA LLC to buy a business is that the individual retirement account business owner would not be able to be actively involved in the business, earn a salary, or even personally guarantee a business loan. Whereas, if the business owner used a ROBS strategy, that individual would be able to be actively involved in the business, earn a salary, as well as personally guarantee a business loan without triggering the IRS prohibited transaction rules.

To learn more about the benefits of the ROBS strategy, please contact a retirement tax expert at 800-472-0646.

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Apr 10

New IRA Rollover Case (Bobrow v. Commissioner) Will Not Impact Most IRA Holders

There are generally two ways of moving IRA funds from one IRA account to another IRA account – an IRA transfer or an indirect rollover.  An IRA transfer is generally accomplished by moving IRA funds from one IRA custodian (bank) to another IRA custodian. The funds are never sent to the individual IRA holder.  Whereas, in the case of an IRA indirect rollover, the IRA funds are requested by the IRA holder and are actually sent to the IRA holder by the IRA custodian as a distribution.  The IRA holder than has sixty (60) days to roll those IRA funds into an IRA or 401(k) Plan account and this indirect rollover can only be done once every 12 months.  If the IRA holder fails to deposit all the IR funds he/she received as part of the indirect rollover, then those funds would be subject to income tax and a 10% early distribution penalty if the individual was under the age of 591/2.

The retirement industry and IRS were generally in agreement that the one indirect rollover rule per 12-month period applies to all IRAs in the aggregate and not to each IRA account opened, even if IRS Publication 590 seem to state otherwise in an example.

In Bobrow Vs. Commissioner, TC Memo, 2014-21, a U.S. Tax Court case, tax attorney Alvan Bobrow took $65,000 out of his traditional IRA account, intending to replace that money within 60 days, as the tax law states, in order to have the transaction treated as an IRA rollover rather than a taxable distribution.

The problem, though, is that right before Bobrow repaid the $65,000 to his traditional IRA account, he took $65,000 out of a different IRA account. Then, just before the 60-day period for that withdrawal expired, Bobrow’s wife took $65,000 out of her traditional IRA, with a $65,000 repayment to Bobrow’s second IRA account taking place just days later. Eventually, the Bobrows repaid the wife’s IRA withdrawal and took the position that all of the transactions were tax-free IRA rollovers. The IRS disagreed, arguing in part that the nested withdrawals and repayments didn’t line up the way the Bobrows contended.

Bobrow Vs. Commissioner, TC Memo, 2014-21 - Indirect IRA Rollover

Bobrow Vs. Commissioner, TC Memo, 2014-21 – Indirect IRA Rollover

Mr. Bobrow, like most people could have completed the transfer of funds without doing an indirect rollover, but simply doing an IRA transfer between institutions, which has no annual limitation on the number of IRA transfers that can be done in a year.  In fact, the IRA transfer is the far more popular approach to moving IRA funds between custodians.  In general, one would only do an indirect rollover if she/she needed use of those funds for a short period of time (under 60 days).  Hence, the Bobrow case does not have much impact on most IRA holders since IRA funds are generally transferred between IRA custodians and there are no limits on the number of IRA transfers that can be done in any time period.

For more information on the Impact of the Bobrow case on IRA transfers and indirect rollovers, please contact a tax professional at the IRA Financial Group at 800-472-0646

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Apr 09

Flipping Homes 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

Flipping homes with an IRA is as eating as writing a checkWith 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.

Control 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 contact an IRA Expert at 800-472-0646 or visit www.irafinancialgroup.com.

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Apr 08

Using a Self-Directed IRA Loan to Make an Investment

The Self-Directed IRA is a retirement solution that will unlock a world of investment opportunities. The Self-Directed IRA is a retirement investment vehicle that allows one to use their retirement funds to make traditional as well as non-traditional investments, such as real estate tax-free and without custodian consent. In most instances, investors using retirement funds to make an investment will use cash to make the investment. Whether the investment is in the form of stocks, precious metals, or real estate most investors using retirement funds to make the investment will not borrow any funds to make the investment. In other words, most investors using retirement funds will use cash to make the investment. One significant reason why retirement account investors will generally not borrow money (also called debt or leverage) as part of an investment of real estate acquisition is the Internal Revenue Code Section 4975 prohibits the IRA holder (you) from personally guaranteeing a loan made to the IRA. Pursuant to Internal Revenue Code Section 4975(c)(1)(B), a disqualified person (i.e. the IRA holder) cannot lend money or use any other extension of credit with respect to an IRA. In other words, the IRA holder cannot personally guarantee a loan made to his or her IRA. As a result, in the case of a Self-Directed IRA, one could not use a standard loan or mortgage loan as part of an IRA transaction since that would trigger a prohibited transaction pursuant to Code Section 4975. This type of loan is often referred to as a recourse loan since the bank can seek recourse or payback from the individual guaranteeing the loan. These loans are generally the most common types of loans offered by banks and financial institutions. Thus, in the case of a Self-Directed IRA, a recourse loan cannot be used. This leaves the Self-Directed IRA investor with only one financing option – a non-recourse loan. A non-recourse loan is a loan that is not guaranteed by anyone. In essence, the lender is securing the loan by the underlying asset or property that the loan will be used for. Therefore, if the borrower is unable to repay the loan, the lender’s only recourse is against the underlying asset (i.e. the real estate) not the individual – hence the term non-recourse. In general, non-recourse loans are far more difficult to secure than a traditional recourse loan or mortgage. There are a number of reputable non-recourse lenders, however, the rate on a non-recourse loan are typically less attractive than a traditional recourse loan.

Using a Self-Directed Loan to make an investmentThe IRS allows IRA and 401(k) plans to use non-recourse financing only. The rules covering the use of non-recourse financing by an IRA can be found in Internal Revenue Code Section 514. Code Section 514 requires debt-financed income to be included in unrelated business taxable income (UBTI or UBIT), which generally triggers a 35% tax. In general, if non-recourse debt financing is used, the portion of the income or gains generated by the debt-financed asset will be subject to the UBTI tax, which is generally 35%. Thus for example, if an individual invests 70% IRA funds and borrows 30% on a non-recourse basis, 30% of the income or gains generated by the debt financed investment would be subject to the UBTI tax. For example, if a Self-Directed IRA investor invests $70,000 and borrows $30,000 on a non-recourse basis (the IRA holder is not personally liable for the loan) – 70/30 equity to debt finance ratio, and the IRA investment generates $1,000 of income annually, 30% of the income or $300 would be subject to the UBTI tax. Note – the $300 tax base could be reduced by any pro rata portion of deduction/depreciation associated the debt-financed property. The rationale behind this is that since the IRS is treating the IRA, which is typically treated as tax-exempt pursuant to IRC 408, as a taxpayer by imposing a tax on the debt-financed portion, the IRS will allow the investor to allocate proportionally any asset expenses or depreciation in order to reduce the tax base. The IRS Form 990-T is the form where the UBTI must be disclosed to the IRS.

Interestingly, by investing in real estate through a Solo 401K Plan, if one uses non-recourse financing, the Solo 401K plan will escape the UBTI/UBIT tax due to an exception to the Unrelated Debt Financed Income (UDFI) rules found under IRC 514(c)(9). This is one reason why the Solo 401K Plan is such an attractive investment vehicle.

To learn more about the rules surrounding using a loan with a Self-Directed IRA to make an investment please contact a Self-Directed IRA Expert at 800-472-0646.

Apr 07

Self-Directed Roth IRA Tax Strategies

Using a Self-Directed Roth IRA LLC presents a number of exciting tax planning opportunities. Whether you currently have a Traditional IRA or a Roth IRA, the IRA Financial Group’s in-house tax and ERISA professionals have significant experience helping clients use a Self-Directed Roth IRA LLC to maximize their tax benefits and investment returns.

Investment Tax Strategies:

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. This presents a number of exciting tax strategies, a few of which are described below:

  • Purchasing a vacation home in or outside of the United States with Roth IRA funds and moving in tax-free at age 59 1/2
  • Purchasing a retirement home in or outside of the United States with Roth IRA funds and moving in tax-free at age 59 1/2
  • Purchasing an office building with Roth IRA funds and then using the building for your own business after you turn 59 1/2
  • Investing in precious metals and then taking possession of the metals once you reach the age of 59 1/2
  • Investing in tax deeds and then taking possession of the property personally once you reach the age of 59 1/2
  • Investing in a distressed property – generating large gains and then withdrawing the funds tax-free for personal use upon reaching the age of 59 1/2
  • Investing in an investment fund – generating large gains and then withdrawing the funds tax-free for personal use upon reaching the age of 59 1/2

Roth Conversion Valuation Discount Tax Strategies:

a Self Directed Roth IRA offers many benefitsThe amount of taxable income on a Roth conversion is based on the fair market value of the IRA assets subject to the conversion. Therefore, the lower the fair market value of the IRA assets the lower the taxes that will be due on the Roth conversion. In general, pursuant to case law, the standard of “fair market value” is an objective test using hypothetical buyers and sellers. Furthermore, in determining the valuation of an LLC, the assets to be valued must be the interests in the entity. The IRA Financial Group’s retirement tax professionals in conjunction with a number of valuation experts have developed a structure that will allow you to take a discount when determining the fair market value of the IRA assets subject to the Roth conversion, thus, reducing the amount of tax you will have to pay on the conversion.

The Roth Conversion Valuation Discount Strategy is based on tested case law. The valuation discounts applicable to an LLC with IRA assets typically fall into two categories: (1) a discount for lack of control, and (2) a discount for lack of marketability. The retirement tax professional at the IRA Financial Group along with a valuation expert will help develop a customized Roth conversion tax strategy that will allow you to take a discount of anywhere from 15% to 35% on the value of the IRA assets subject to the Roth conversion. The Roth Conversion Valuation Discount Strategy can save you thousands of dollars in taxes and is based on established case law.

For example, if you have a Traditional IRA and want to convert to a Self-Directed Roth IRA LLC to purchase raw land, real estate, precious metals, or invest in an investment fund, using the Roth Conversion Valuation Discount Strategy can save you thousands of dollars on the conversion.

To learn more about how a Self-Directed Roth IRA LLC can offer you significant tax and investment benefits please contact an IRA Expert from the IRA Financial Group at 800-472-0646.

Apr 04

Self-Directed IRA LLC Structure Aiding Real Estate Investors Win Bidding Wars for Real Estate

Lack of Inventory and multiple home offers for real estate have caused retirement investors to turn to “checkbook control” Self-Directed IRA LLC to access cash According to Report

IRA Financial Group, the leading provider of “checkbook control” self-directed IRA LLC solutions, announces the finding of its internal report that found that the lack of inventory and increase demand for real estate has caused retirement investors to turn to the “checkbook control” Self-Directed IRA LLC solution to access cash. “Our clients have seen real estate prices steadily increase throughout the country driven by lack of inventory in the housing market, causing them to need to make cash offers and have quick access to their retirement funds to make an offer, “ stated Jean Scharfman, a tax professional with the IRA Financial Group. “We are hearing from our clients that there’s a lot of demand right now for real estate investment properties which is requiring Self-Directed IRA LLC investors to move quick on a potential investment,” stated Ms. Scharfman.

Self-Directed IRA LLC Structure Aiding Real Estate Investors Win Bidding Wars for Real EstateThe primary advantage of using a “checkbook control” Self Directed IRA LLC to make real estate investments is that investments can be made by simply writing a check or executing wire without involving a custodian. In addition, all income and gains associated with the IRA investment grow tax-deferred or a tax-free in the case of a Roth IRA.

With IRA Financial Group’s self directed IRA real estate solution , traditional IRA or Roth IRA funds can be used to buy real estate throughout the United States in a tax-deferred account by simply writing a check. “Even with real estate prices climbing nationwide, our clients are still finding attractive real estate opportunities for the self-directed IRA LLC and gaining the opportunity to move quickly on a potential investment, “ stated Adam Bergman, a tax partner with the IRA Financial Group. “Using a Self Directed IRA LLC to buy real estate presents a number of exciting tax planning opportunities, “ stated Mr. Bergman.

IRA 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 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 real estate.

Using IRA Financial Group’s real estate IRA LLC investors will gain the ability to make real estate investments in a tax efficient manner by using a “checkbook control” self-directed IRA LLC our clients have been able to compete and win bidding wars for real estate investments,” stated Mr. Bergman.

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 Facilitator. 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.