Aug 27

Can my Self Directed IRA LLC get a mortgage on a piece of property?

Yes, you can use a Self Directed IRA LLC to get a mortgage. The mortgage would need to be a non-recourse type of loan. With a nonrecourse loan, if your IRA fails to make the payments, the only recourse the lender has is the property itself. Also, note that if your IRA obtains a loan, unrelated debt financing income tax (UDFI) will apply, which will subject the portion of the income or gains that are debt financed to Unrelated Business Taxable Income (UBTI).

Can my Self Directed IRA LLC get a mortgage on a piece of property?“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).

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

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Aug 24

Slide in Stock Market Creating Roth Conversion Opportunities for Self-Directed IRA Investors

Self-Directed Roth IRA offering tax-planning opportunities for depressed stock holding.

IRA Financial Group, the leading provider of “checkbook control” Self-Directed IRA LLC solutions, has seen demand from investors looking to take advantage of Roth IRA conversion opportunities as a result of a depressed stock market. With the S&P 500 & Dow Jones in negative territory as of August 21, 2015, investors are looking for tax planning opportunities. As a result, many retirees are looking to the Self-Directed Roth IRA as a vehicle for generating tax-free gains on future stock growth.

Slide in Stock Market Creating Roth Conversion Opportunities for Self-Directed IRA InvestorsAccording to Adam Bergman, a tax partner with the IRA Financial Group, a Roth conversion offers a retirement account holder the ability to convert pre-tax funds to a Roth (after-tax account). The advantage of a Roth conversion is that all income and gains from the Roth investment can be taken as a tax-free distribution assuming the individual is over the age of 591/2 and the Roth account has been opened at least five years (qualified distribution). The downside of the Self-Directed Roth IRA conversion is that tax is due on the amount of cash or fair market value of the asset being converted. Accordingly, paying tax on depressed stock, which some have been down close to 20% could prove to be a tax advantages transaction, assuming you believe the market stock will increase in value in the future. The same type of strategy can be employed by taking the shares as a taxable distribution. Assuming one is over the age of 591/2, which would eliminate the 10% early distribution penalty, income tax would be due on the amount of the distribution, fair market value of the devalued shares. Again, if one believes the shares will increase in value in the future, then taking a taxable distribution now versus in the future when the shares may be worth more could make sense.

Some factors to consider when contemplating a Roth conversion or taxable distribution strategy with the depressed stock: (i) your ability to pay the tax now, (ii) availability of losses that can be used to offset any potential tax, (iii) your income tax bracket now versus your expected tax rate when you have to take RMDs, (iv) the size and value of your stock holdings, (v) and, of course, your long-term feelings about the stock.

“Since 2008, the stock markets have made many retirement account holders quite happy over years, but its recent slide and devalued prices of many popular stocks has created excited tax planning opportunities that come along with owning a devalued stock could prove to be a valuable exercise., such as the Roth IRA conversion” 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 and Solo 401(k) Plan provider. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

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

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Aug 21

What investments can I make with a Self Directed IRA LLC?

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 only describes the type of investments that are prohibited, which are very few.

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

  • Residential or commercial real estate
  • Raw land
  • Foreclosure property
  • Mortgages
  • Mortgage pools
  • Deeds
  • Private loans
  • Tax liens
  • Private businesses
  • Limited Liability Companies
  • Limited Liability Partnerships
  • Private placements
  • Gold
  • Stocks, bonds, mutual funds
  • Most currencies

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

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Aug 20

Six Real Estate Transactions Subject to UBTI

In Mauldin v. Comr. 195 F.2d 714 (10th Cir. 1952), the court explained that there is no fixed formula or rule of thumb for determining whether property sold by a taxpayer was held by him primarily for sale to customers in the ordinary course of his trade or business. Each case must rest upon its own facts. The court identified a number of helpful factors to point the way, among which are the purposes for which the property was acquired, whether for sale or investment; and, continuity and frequency of sales as opposed to isolated transactions. However, in Adam v. Comr. 60 T.C. 996 (1973), acq., 1974-1 C.B. 1., the Tax Court analyzed the following factors in determining whether the taxpayer was engaged in the operation of a trade or business:

1. The purpose for which the asset was acquired: Examples of good facts that support the conclusion that the sale of property is excluded from unrelated business taxable income is when the property was originally acquired to further the organization’s tax-exempt purpose – in the case of an IRA – investment.

2. The frequency, continuity, and size of the sales: This factor is particularly significant in determining whether the sale constitutes a trade or business that is regularly carried on, within the meaning of Internal Revenue Code Section 512. It may range from a one-time sale of a parcel of land to many sales over a long period. If sales are infrequent, not continuous, and small, the organization will not likely be viewed as similar to a taxpayer in the trade or business of selling real estate. Conversely, as sales become more frequent, more continuous, and larger, they are more likely to be considered a trade or business that is regularly carried on, comparable to the commercial activity of a taxpayer in the trade or business of selling real estate.

However, in PLR 9247038, the IRS issued a favorable ruling to an organization that planned to sell land in up to 15 sales spread over a five- to 10-year period. The reason for the number of sales over the time period was that the value of the land was such that it was unlikely a single purchaser would be able to acquire the entire parcel. Also, market conditions dictated this sales process for the organization to receive maximum value, and keep control of the pace and type of development that would occur after the sales. Similarly, in PLR 9017058, where the exempt organization was engaged in selling 45 of 68 lots, such sales were deemed to meet the exception from unrelated business income under Internal Revenue Code Section 512(b)(5). Although this quantity of sales is admittedly significant, external forces essentially dictated the high number of sales. The organization first tried to sell the property in one block but was unsuccessful due to the high cost of developing the property in order to comply with local ordinances. According to the IRS, had these two facts been absent, i.e., (1) the organization had attempted to sell the entire property as a whole, and (2) local ordinances required certain development prior to sale as residential property, it is possible that the high number of sales in this case would have resulted in unrelated business taxable income.

Six Real Estate Transactions Subject to UBTIThus, a limited number of sales is usually a “good fact” for purposes of the facts and circumstances test. However, one should not assume that a set limit applies such as, for example, 15 sales. Rather, one should remember that factors such as that frequency of sales and cost of the property to be sold and market conditions play a part in the number of sales allowed and the time frame of the sales allowed. If an organization has significant amounts of acreage, or the cost of the property precludes finding one purchaser, then it is more likely that the organization will be permitted to sell the property in more than one transaction, and still comply with the requirements of Internal Revenue Code Section 512(b)(5).

3. The activities of the seller in the improvement and disposition of the property: The smaller the extent of improvements by the organization to the property, the more likely the sale will fall under the exclusion for unrelated business income under Internal Revenue Code Section 512(b)(5). In PLR 8043052, an organization proposed to sell a parcel of undeveloped raw land . The fact that the land had remained undeveloped was significant in determining that gains from the proposed transaction would not constitute unrelated business taxable income. In PLR 8522042, the property in question consisted of both developed and undeveloped lands. The developed lands included residential land improved with single-family dwellings or condominium apartments. However, all the improvements were constructed by unrelated third parties. The absence of development activity by the organization demonstrated that it was not holding property for sale to customers in the ordinary course of trade or business.

4. The extent of improvements made to the property; The more minimal the activities of the owner in improving and disposing of property, the more likely its sale will meet the exclusion from unrelated business taxable income under Internal Revenue Code Section 512(b)(5). Of course, the greater the number of improvements allowed, the greater the likelihood of maximizing gain from the sale. So there is a balancing act that organizations must exercise when preparing land for disposition in order to maximize its return, while not acting too much like a dealer and triggering UBTI.

The IRS ruled favorably on improvements made to property in accordance with city or local ordinances requiring the organization to construct a street as well as curb, gutter, sidewalk, drainage, and water supply improvements in order to subdivide the property for sale.

Retaining limited control of the redevelopment project before the land is eventually sold also has been an acceptable activity by a tax-exempt organization when the organization is not involved in any way with advertising, marketing, or otherwise attempting to sell the lots. In PLR 200544021, an organization maintained control over the development process to ensure a compatible environment for the adjoining high school. The IRS recognizes that even though an organization is concerned with receiving a high yield from the sale, it may be equally concerned that the property be developed in keeping with the surrounding features of the property. In addition, an organization’s interest in preserving the natural beauty of a tract of land to be developed is not generally indicative of a normal sales transaction.

In PLR 8950072, a tax-exempt foundation’s largest asset was a parcel of unimproved real estate. The foundation was examining four ways of using the property: (1) continue leasing the property; (2) sell the property as is; (3) complete some preliminary development work — obtaining permits and approvals — and sell the property; or (4) completely develop the property before sale. The last alternative would provide the highest return. The IRS ruled that the first three alternatives would not subject the foundation to UBIT or adversely affect its exempt status. However, the last alternative, to assume all the responsibilities of development, would result in UBTI , but would not affect the foundation’s exempt status. Alternative 4 is very similar to the situation in Brown v. Comr. Like that case, the taxpayer intended to subdivide and develop the property for sale to the general public. Such sales would not be isolated or casual transactions. The organization planned to be extensively involved in both development and marketing activities. Thus, the IRS concluded that the property will be held primarily for sale to customers in the ordinary course of trade or business and not subject to the exclusion from unrelated business income of Internal Revenue Code Section 512(b)(5).

Aside from development activities, the lack of marketing of the property by the organization helps differentiate it from a taxpayer in the trade or business of selling real estate. For example, in PLR 8522042, an organization’s lack of promotional or development activity in connection with the proposed sale demonstrated that it was not holding property for sale to customers in the ordinary course of a trade or business. Moreover, the use of real estate brokers or other independent contractors is not determinative. Rather, the pertinent facts involve the extent of the activities of the organizations themselves in promoting and marketing the property.

5. The proximity of sale to purchase: In evaluating this factor, generally the longer the period between purchase and sale, the more likely the sale will be excluded from UBTI . For example, in PLR 9505020, the fact that a school received land by bequest and held it for a significant period of time was considered a favorable factor, and the IRS did not impose UBIT on the sale of the land when the school was facing condemnation proceedings and it did not actively advertise the sale.

6. The purpose for which the property was held during the taxable year: In evaluating this factor, generally the longer the period between purchase and sale, the more likely the sale will be excluded from UBTI . For example, in PLR 9505020, the fact that a school received land by bequest and held it for a significant period of time was considered a favorable factor, and the IRS did not impose UBIT on the sale of the land when the school was facing condemnation proceedings and it did not actively advertise the sale.
In Adam and subsequent cases, the Tax Court found that no single factor is controlling but all are relevant facts to consider in determining whether the sale of property occurred in the regular course of the taxpayer’s business. In numerous private letter rulings, the IRS cites and applies these same Adam factors. The IRS has characterized these factors as a “facts and circumstances test.” The IRS has even applied these same factors when analyzing the activities of an exempt organization that are carried out through a limited partnership between the exempt organization and the developer.

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

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Aug 18

Distribution Rules for Roth IRAs

Distributions from Roth IRAs are not required to begin at any particular time, and there are no limitations on death benefits. Distributions from a traditional IRA, in contrast, must begin by April 1 following the year in which the owner reaches age 70 1/2 or (if later) retires and must generally be made in ways that will exhaust the account during the lifetimes or over life expectancies of the owner and his or her spouse. In other words, while congressional policy is that traditional IRAs be for retirement savings only, Congress acquiesces in the use of Roth IRAs for accumulating wealth to be transmitted at death.

Distribution Rules for Roth IRAsRoth and traditional IRAs are subject to the same rules for distributions after the owner’s death. If the beneficiary is not the surviving spouse, distributions must either be completed by the end of the fifth calendar year following the year of the owner’s death or consist of a series of payments beginning before the end of the calendar year following the year of death and continuing not longer than the beneficiary’s life expectancy. If the beneficiary is a surviving spouse, distributions may be delayed until the spouse reaches age 70 1/2 or retires, or the spouse may elect to treat the IRA as his or her own.

A “qualified distribution” from a Roth IRA is excluded from gross income. To be qualified, a distribution must satisfy both of the following requirements:

  • It must not occur before the fifth taxable year following the year for which a Roth IRA contribution was first made by the taxpayer or the taxpayer’s spouse.
  • It must be made after the account owner reaches age 59 1/2 or becomes disabled, be made to the owner’s beneficiary or estate after the owner’s death, or be a “qualified special purpose distribution.”

Qualified special purpose distributions are distributions, up to a $10,000 lifetime maximum, that are “used” by the distributee within 120 days to pay “qualified acquisition costs” for property to serve as the “principal residence” of a “first-time homebuyer,” who must be the IRA owner, his or her spouse, or a child, grandchild, or more remote ancestor of the owner or spouse. Qualified acquisition costs are costs of acquiring, constructing, or reconstructing a residence, including “reasonable settlement, financing, or other closing costs.” A first-time homebuyer is a person who has not had a “present ownership interest in a principal residence” during the two years preceding the acquisition of the residence financed with the distribution. A distribution can qualify only to the extent of $10,000, less all prior qualified first-time homebuyer distributions received by the recipient.

A nonqualified distribution is excluded from gross income only to the extent of the excess of the taxpayer’s contributions to Roth IRAs, less all prior distributions, qualified and unqualified. A distribution of an excess contribution is not qualified and is therefore included in gross income to the extent of the income of the account required to be included in the distribution. An amount included in gross income on a nonqualified distribution may be subject to an additional 10 percent penalty tax under Internal Revenue Code Section 72(t) (e.g., if made to the owner before age 59 1/2 ). Very generally, the effect of these rules is that investment returns of a Roth IRA are tax-free to the distributee if received in a qualified distribution but are otherwise taxed.

The basis of property other than money received in a distribution from a Roth IRA is the property’s fair market value, whether or not the distribution is qualified. An owner’s lifetime gift of a Roth IRA to another person is treated as a distribution in full to the owner and a gift of an account or annuity that is not an IRA.

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

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Aug 17

Why You Need the Checkbook Control Solution for Your IRA

Experience the Self-Directed IRA LLC “Checkbook Control” Advantage

Many traditional IRA custodians advertise themselves as offering a Self-Directed IRA, but what that really means is that you will need approval from your custodian before making an investment. Whereas, in the case of a truly Self-Directed IRA, a limited liability company (“LLC”) is established that is owned by the IRA account and managed by the IRA account holder providing the IRA holder with “checkbook control” over his or her funds.

In general, there are three categories of self-directed IRA structures distinguishable by the level of control the custodian exercises over your IRA investments.

1. Financial Institution Self-Directed IRA

With a financial institution self-directed IRA, you are able to direct your IRA investments, however, you are generally limited to investing in the financial products offered by the financial institution. For example, a financial institution such as Vanguard or Fidelity will allow you to select the type of investments for your IRA, but your choices would generally be limited to the financial products they offer, such a stocks, mutual funds, and bonds. With a financial institution self-directed IRA, you will not be permitted to make non-traditional investments such as real estate, precious metals, private business investments, foreign currency, options, etc.

2. Custodian Controlled Self-Directed IRA Without “Checkbook Control”

With a custodian controlled Self-Directed IRA without “Checkbook Control”, many types of nontraditional investments, such as real estate, are generally permitted, however, custodian consent is required in order to enter into and execute the transaction. This typically results in long delays and high custodian fees associated with the transaction. For example, before engaging in an IRA investment, you will be required to receive the consent of the custodian. To this end, you will be required to provide the custodian with the transaction documents for review as part of their transaction review process. As a result, it is common to experience time delays as well as high annual fees as well as additional transaction fees. For example, it is common for a moderately active investor with $50,000 in assets with a Self-Directed IRA custodian without checkbook control to end up paying from $400 to $600 in aggregate annual fees (i.e. account value fee, transaction fees, approval letters).

In addition, there is no guarantee that the custodian will approve your investment even though the investment would not violate IRS rules. Overall, with a custodian controlled self-directed IRA, even though you will generally be permitted to make most non-traditional IRA investments, time delays and high custodian fees are the common characteristics of using a custodian controlled self-directed IRA.

3. Self-Directed IRA LLC with “Checkbook Control”

With a truly Self-Directed IRA, you will have total control over your IRA funds and you will no longer have to get each investment approved by the custodian of your account. Instead, all decisions are truly yours. 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 IRA LLC bank account to make the investment. A truly Self-Directed IRA allows you to eliminate the delays associated with an IRA custodian, enabling you to act quickly when the right investment opportunity presents itself.

With a Self-Directed IRA LLC, a limited liability company (“LLC”) is established that is owned by the IRA account and managed by the IRA account holder. The IRA Holder’s IRA funds are then transferred by the Custodian to the LLC’s bank account providing the IRA holder with “checkbook control” over his or her IRA funds.

The Self-Directed IRA LLC “Checkbook Control” Structure has been in use for over 30 years. The notion of using an entity owned by an IRA to make an investment was first reviewed by the Tax Court in Swanson V. Commissioner 106 T.C. 76 (1996). In Swanson, the Tax Court, in holding against the IRS, ruled that the capitalization of a new entity by an IRA for making IRA related investments was a permitted transaction and not prohibited pursuant to Code Section 4975. The Swanson Case was later affirmed by the IRS in Field Service Advice Memorandum (FSA) 200128011.

With a Self-Directed IRA LLC with “Checkbook Control”, 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 IRA LLC bank account to make the investment. The Self-Directed IRA allows you to eliminate the delays associated with an IRA custodian, enabling you to act quickly when the right investment opportunity presents itself.

 

Financial Institution Self-Directed IRA

Custodian Controlled Self-Directed IRA Without “Checkbook Control”

Self-Directed IRA LLC with “Checkbook Control”

Traditional investments options (stocks, mutual funds, etc.)

Yes

Yes

Yes

Nontraditional Investment options (i.e. real estate, precious metals, tax liens, etc)

No

Yes

Yes

Unlimited Investment Options

No

No

Yes

All Investments must be approved by the custodian

N/A

Yes

No

True “checkbook control”

No

No

Yes

Direct Access to your Retirement Funds

No

No

Yes

Limited Liability

No

No

Yes

High annual account fees

No

Yes

No

Transaction fees

No

Yes

No

Bankruptcy Protection of up to $1 million

Yes

Yes

Yes

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

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Aug 14

What is a SEP Self Directed IRA?

A SEP is a simplified employee pension plan. Any employer can establish a SEP. An employer can maintain both a SEP and another plan. Annual contributions an employer makes to an employee’s SEP-IRA cannot exceed the lesser of (i) 25% of compensation, or $53,000 for 2015. However, special rules apply when figuring out the maximum deductible contribution for a self-employed individual (typically 20% of compensation).

What is a SEP Self-Directed IRA LLC?

A Self Directed SEP IRA LLC “Checkbook Control” structure is an IRS approved and Tax Court certified structure that offers one the ability to use his or her SEP IRA funds to make almost any type of investment on their own without requiring the consent of any custodian. Tired of being forced to invest in stocks or mutual funds? Have an investment opportunity, such as real estate or a business investment that you would love to make with your SEP IRA funds… then the Self Directed SEP IRA LLC is your solution.

By gaining “checkbook control” over your SEP IRA funds you will gain the following advantages:

“Checkbook Control”: You will no longer have to get each investment approved by the custodian of your account. Instead, as manager of the SEP self directed IRA LLC, all decisions are truly yours. To make an investment, simply right a check and use the funds straight from your Self Directed SEP IRA LLC bank account.

What is a SEP Self Directed IRA?For example, Jen, who is self-employed, has established a SEP Self Directed IRA LLC. Jen’s SEP IRA care of the custodian is the sole member of the LLC and Jen will be appointed as manager of the LLC. Jen has opened her Self Directed SEP IRA LLC bank account at a local bank. The name of Jen’s Self-Directed SEP IRA LLC is ABC LLC. Jen wishes to use her IRA funds to purchase a home from Jack, an unrelated third-party (non-disqualified person). Jack is anxious to close the transaction as soon as possible. With a “checkbook control” Self Directed SEP IRA LLC, Jen, as manager of the LLC, can simply write a check using the funds from the ABC LLC bank account or can wire the funds directly from the account to Jack. Jen, as manager of the LLC, no longer needs to seek the consent of the custodian before making the real estate purchase. With a regular Self Directed IRA without “checkbook control”, Jen would likely not be able to make the real estate purchase since seeking custodian approval would have likely taken too much time.

Investment Opportunities: With a Self-Directed SEP IRA LLC, you will be able to invest in almost any type of investment opportunity that you discover, including: real estate (rentals, foreclosures, raw land, tax liens etc.), private businesses, precious metals, hard money & peer to peer lending as well as stock and mutual funds; you’re only limit is your imagination. The income and gains from these investments will flow back into your SEP IRA tax-free.

Low Custodian Fees: A Self-Directed SEP IRA LLC “Checkbook Control” structure will help you save a significant amount of money on custodian fees. With a Self Directed SEP 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 SEP IRA LLC, an FDIC backed IRS approved passive custodian is used.

The custodian in the “checkbook control” Self Directed SEP IRA LLC structure is referred to as a “passive” custodian largely because the custodian is not required to approve any SEP IRA related investment and simply serves the role of satisfying IRS regulations. By using a Self Directed SEP 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.

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

Investments Made Quickly: With a Self-Directed SEP IRA LLC “Checkbook Control” structure, you will have the power to act quickly on a potential investment opportunity. When you find an investment that you want to make with your SEP IRA funds, as manager of the SEP IRA LLC, simply write a check or wire the funds straight from your Self Directed SEP IRA LLC bank account to make the investment. The Self Directed SEP IRA allows you to eliminate the delays associated with an IRA custodian, enabling you to act quickly when the right investment opportunity presents itself.

Tax-Free Gains: With the Self-Directed SEP IRA LLC “Checkbook Control” structure, all income and gains from the SEP IRA investments will generally flow back to your SEP IRA LLC tax-free. Because an LLC is treated as a pass-through entity for federal income tax purposes and the SEP IRA, as the member of the LLC, is a tax-exempt party pursuant to Internal Revenue Code Section 408, all income and gains of the LLC will flow-through to the IRA tax-free!

Direct Access: With a Self-Directed SEP IRA LLC “Checkbook Control” structure, you, as manager of the SEP IRA LLC, will have direct access to your SEP 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 paying any review fees.

Limited Liability: By using a Self-Directed SEP IRA LLC with “Checkbook Control”, your SEP IRA will benefit from the limited liability protection afforded by using an LLC. By using an LLC, all your SEP IRA assets held outside the LLC will be shielded from attack. This is especially important in the case of SEP 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 SEP IRA LLC with “Checkbook Control”, the SEP IRA holder’s IRA will be protected for up to $1 million in the case of personal bankruptcy. In addition, most states will shield a Self Directed SEP IRA from creditors attack against the IRA holder outside of bankruptcy. Therefore, by using a Self-Directed SEP IRA LLC, the IRA will be generally protected against creditor attack against the SEP IRA holder.

To learn more about the Self Directed SEP IRA LLC solution, contact one of our SEP IRA Experts at 800-472-0646 today!

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Aug 13

What Separates IRA Financial Group From the Pack?

The IRA Financial Group is owned and operated by tax and ERISA professionals who have worked at some of the largest law firms in the United States, including White & Case LLP and Dewey & LeBoeuf LLP. As a result, our retirement tax professionals’ tax and IRA knowledge in this area is unmatched.

What Separates IRA Financial Group From the Pack?Unlike our competitors, our tax and ERISA professionals are always available to answer client questions and regularly attempt to field all incoming customer phone or email inquiries. When choosing the IRA Financial Group, you will have direct and unlimited access to our in-house tax and ERISA professionals. Each client of the IRA Financial group is assigned a retirement tax professional in order to ensure that the tax structure established is in compliance with IRS rules. Because we are owned and operated by tax and ERISA professionals, we are able to do all necessary IRA rollover or transfer paperwork and consultation in-house, allowing us to expedite the process from start to finish for significantly less than our competition.

Our retirement tax professionals have helped thousands of clients establish IRS compliant Self-Directed IRA LLC and Solo 401(k) Plan structures.

Talk to one of our retirement tax professionals today and begin experiencing the benefits of tax-free investing!

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

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Aug 12

What are the penalties if I engage in a “prohibited transaction” with a Self Directed IRA?

Your investment may be disallowed under Internal Revenue Code Section 408 or result in a “Prohibited Transaction” under Internal Revenue Code Section 4975 and could result in the immediate disqualification of your IRA.

Although IRAs are generally not ERISA plans, the Department of Labor has jurisdiction over these plans for purposes of the prohibited transaction rules, including individual requests for exemptions from those rules.   There are two different consequences for incurring a prohibited transaction under the Code:

  • For the IRA owner, the IRA is deemed immediately disqualified as of January 1 of the year in which the prohibited transaction occurred (an extremely severe tax consequence), resulting in current income tax treatment of a traditional IRA and possible excise tax penalty for a premature withdrawal from an IRA. If this deemed “distribution” occurs, it will be subject to ordinary income tax and, if you were under the age of 59 1/2 at that time, a ten (10%) percent excise tax on premature distributions may also be assessed.
  • For the Disqualified Person involved in the transaction, the initial tax on a prohibited transaction is 15 percent of the amount involved for every year (or portion thereof) in the “taxable period,” which is the period beginning when the transaction occurs and ending on the date of the earliest of (1) the mailing of a notice of deficiency for the tax, (2) assessment of the tax, or (3) correction of the transaction. The 15% excise tax is followed by an additional tax of 100% if the disqualified person is recalcitrant.

The prohibited transaction rules are extremely broad. Thus, the IRA owner self directing his investments must be especially cautious in engaging in transactions that could compromise his best judgment or result in indirectly benefiting him.

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

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