Jun 28

Self-Directed IRA Investors Focusing on Foreign Bank Account Reporting (FBAR) June 30th deadline

FBAR reporting for self-directed IRA LLC investors with a foreign bank account is due by June 30th

IRA Financial Group, the leading provider of “checkbook control” self-directed IRA LLC structures has seen an increase number of self directed IRA investors with foreign investments and bank accounts seeking information on foreign bank reporting (FBAR) requirements.

According to Adam Bergman, a tax attorney with the IRA Financial Group, “If your retirement account has a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR) by June 30, 2013.” The FBAR is required because foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions. The FBAR is a tool to help the United States government identify persons who may be using foreign financial accounts to circumvent United States law. Investigators use FBARs to help identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad.

FBAR reporting for self-directed IRA LLC investors with a foreign bank account is due by June 30th In general, unless an exception applies, all United States persons are required to file an FBAR if: (i) The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and (ii) The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported. According to the Internal revenue Service, a financial interest arises when the owner of record or holder of legal title; the owner of record or holder of legal title is the agent or representative; or the U.S. person would have a sufficient interest in the entity that is the owner of record or holder of legal title.

According to Mr. Bergman, an IRA and 401(k) Plan would generally exempt from filing the FBAR form. However, it is unclear whether a Self-Directed real estate IRA LLC would be exempt from the FBAR requirement since the exception only states “IRA owners and beneficiaries” and there is no guidance as to whether the IRS would view the LLC as separate and distinct from the IRA. As a result, we are advising all our self-directed IRA LLC clients with foreign bank accounts to contact their tax accountant for additional information. “The scope of FBAR rules are so far reaching that a self-directed IRA investor who bought foreign real estate with a IRA LLC would likely be required to file the FBAR by June 30th, ” stated Mr. Bergman,

In addition, taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. The new Form 8938 filing requirement does not replace or otherwise affect a taxpayers requirement to file FBAR. The Form 8938 is due when the taxpayer’s income tax return is filed, including extensions.

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 provider of self-directed IRA LLC “checkbook control” solutions. 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.

Jun 27

Estate Planning Opportunities with a Self-Directed Roth IRA

In addition to the significant tax benefits in using a Self-Directed Roth IRA LLC to make investments, the Roth IRA also offers a number of very exciting estate planning opportunities.

In general, a self-directed Roth IRA is an after-tax account that allows the Roth IRA holder to benefit from tax-free investment growth, so long as a Roth IRA distribution is not taken prior to a five year holding period and the Roth IRA holder is not under the age of 59/1/2 ( a “qualified distribution”). In addition, a Roth IRA holder would not be subject to the required minimum distribution rules (“RMD”).

With IRA Financial Group’s Self-Directed Roth IRA LLC Estate Planning Solution, your family could receive tax-free use of your Roth IRA funds. Converting a pre-tax IRA to a Roth IRA could be used as a very valuable estate-planning tool for estate owner’s that would be subject to the estate tax (For 2013 – estates over $5,250,000) as the Roth conversion funds would be paid out of funds subject to estate tax.

Estate Planning Opportunities with a Self-Directed Roth IRAEstate Tax Basics

In general, an IRA, whether a traditional or a Roth, is included in the owner’s gross estate. You can’t avoid that. But when a traditional IRA is inherited, the beneficiary must include all distributions in gross income just as the original owner would have. The distributions are taxed at the beneficiary’s ordinary income tax rate. The beneficiary is able to stretch out the distributions over his or her life expectancy, but annual distributions are required and will be taxed. Hence, when passing a Traditional IRA to a spouse or child, the beneficiary is required to pay ordinary income tax on the IRA distribution amount, which would reduce the amount of Traditional IRA funds available to spend.

Converting a Traditional IRA to a Roth IRA – Estate Planning Benefits

In a conversion of a Traditional IRA to a Roth IRA, the IRA converted amount is as though it were taken as a distribution. So, hence, you would be subject to ordinary income taxes on the converted amount. Note: there is no restriction on the amount of IRA funds that can be converted at one time.

The first estate tax benefit of a Roth IRA conversion is that the Roth IRA holder’s estate would be reduced by the income taxes paid on the amount of the Roth IRA conversion. There are several estate planning benefits to paying tax on the Roth conversion while you are alive.

  • Turning Taxable Distributions into Tax-Free Distributions: Doing a Roth IRA conversion is in effect paying the taxes on the IRA funds for your heirs. They would have owed the taxes in the future when they were required to take a distribution from the inherited IRA. Instead, the Roth IRA holder would be paying the tax now, out of his/her taxable estate, and avoid estate and gift taxes on that amount. Thereafter, when your beneficiary would take a distribution from the inherited Roth IRA, those Roth IRA distributions would be tax-free.
  • Pay Tax & Reduce Estate Taxes: Paying the taxes now reduces the size of your estate and any estate tax bill. This isn’t a factor for estates below the taxable level, but it could be important for taxable estates.
  • Lifetime of Tax Benefits : A Roth IRA conversion can provide lifetime income tax benefits to the Roth IRA holder and it can also benefit your beneficiaries. When you maintain a traditional IRA, after age 70½ you’re required to take minimum annual distributions, which would be subject to income tax. If it turned out that you didn’t need this money for spending or living purposes, it simply increases the taxes you would be required to pay. In addition, being required to take a Traditional IRA distribution could increase your income enough to push you into a higher tax bracket, reduce itemized deductions, increase taxes on Social Security benefits, and have other effects. The older you become, the higher the required distributions and taxes become. With a Roth IRA, you or your beneficiaries could benefit from tax-free appreciation of the Roth IRA assets as well as generating tax-free income to live off.
  • Tax-Free Growth & Tax-Free Income . Once the Traditional IRA has been converted to a Roth IRA, the Roth IRA holder and his or her beneficiaries would be able to benefit from tax-free growth and income generated by the Roth IRA. In other words, the assets of the Roth IRA will be able to grow tax-free and all “qualified distributions” from the Roth IRA would be tax-free allowing the Roth IRA holder or his or her beneficiaries to live off the Roth IRA funds without ever having to pay tax on the income.
  • Take Advantage of Historical Low Tax Rates: Even though a lot has been made of the increasing Obamacare tax rates, our current income tax rates are still at historical lows. Therefore, it is conceivable that income tax rates will rise in the future especially with the high levels of debt that is being used by the Government to stimulate the economy. Doing a Roth IRA conversion now versus later could potentially be a tax savvy decision if the Roth IRA grows at a respectful rate and if tax rates increase. Having a Roth IRA to use or offer to your beneficiaries in a high tax environment will prove to be extremely tax beneficial.

The Self-Directed Roth Stretch IRA

Unlike the original Roth IRA owner, a non-spousal beneficiary of a Roth IRA is required to take minimum distributions over his or her life expectancy. Note: a spousal beneficiary of a Roth IRA is not required to take a Roth IRA distribution.

In the case of a non-spousal Roth IRA beneficiary, when the beneficiary is relatively young, there is the potential for the distributions to be less than the annual earnings of the Roth IRA, so the Roth IRA grows while the distributions are being taken. Of course, the beneficiary can take more than the minimum, even the entire Roth IRA, at any time tax-free. In other words, using a Self-Directed Roth Stretch IRA will allow an individual to transfer tax-free assets to children or other beneficiaries and allow those individuals to benefit from tax-free income while the Roth IRA contributes to grow tax-free.

To learn more about the estate tax benefits of having a Self-Directed Roth IRA LLC, please contact a tax professional from the IRA Financial Group at 800-472-0646.

Jun 26

How to Transfer a SEP IRA to a Self-Directed IRA LLC

Individuals may generally transfer IRA or rollover eligible qualified retirement plan assets into a self-directed IRA LLC structure. Individuals may also roll over after-tax retirement funds to a Roth Self-Directed IRA.

What is the most Common Way to Fund a Self-Directed IRA?

Transfers and rollovers are types of transactions that allow movements of assets between like IRAs – Traditional IRA to Traditional IRA, including Traditional IRAs that contain simplified employee pension (SEP) contributions. A SEP IRA transfer is the most common method of funding a Self-Directed IRA LLC or Self-Directed Roth IRA.

SEP IRA Transfers to a Self-Directed IRA

Individuals may generally transfer IRA or rollover eligible qualified retirement plan assets into a self-directed IRA LLC structure.A Traditional IRA to Traditional IRA, including Traditional IRAs that contain SEP contributions, transfer is one of the most common methods of moving assets from one IRA to another. A transfer usually occurs between two separate financial organizations, but a transfer may also occur between IRAs held at the same organization. If an IRA transfer is handled correctly the transfer is neither taxable nor reportable to the IRS. With an IRA transfer, the IRA holder directs the transfer, but does not actually receive the IRA assets. Instead, the transaction in completed by the distributing and receiving financial institutions. In sum, in order for the IRA transfer to be tax-free and penalty-free, the IRA holder must not receive the IRA funds in a transfer. Rather, the check must be made payable to the new IRA custodian. Also, there is no reporting or withholding to the IRS on an IRA transfer.

The tax attorneys at the IRA Financial Group will assist you fund your Self-Directed IRA LLC by transferring your current SEP IRA funds to your new Self-Directed IRA structure tax-free and penalty-free.

How the SEP IRA to Self-Directed IRA Transfer Works?

Your assigned tax attorney and paralegal will work with you to establish a new Self-Directed IRA account at a new FDIC and IRS approved IRA custodian. The new custodian will then, with your consent, request the transfer of your SEP IRA assets from your existing IRA custodian in a tax-free and penalty-free IRA transfer. Once the IRA funds are either transferred by wire or check tax-free to the new IRA custodian, the new custodian will be able to invest the IRA assets into the new IRA LLC “checkbook control” structure. Once the funds have been transferred to the new IRA LLC, you, as manager of the IRA LLC, you would have “checkbook control” over your retirement funds so you can make traditional as well as non-traditional investments tax-free and penalty-free.

60-Day Rollover Rule

An individual generally has sixty (60) days from receipt of the eligible rollover distribution from a SEP IRA account to roll the funds into a Self-Directed IRA LLC structure. The 60-day period starts the day after the individual receives the distribution. Usually, no exceptions apply to the 60-day time period. However, in cases where the 60-day period expires on a Saturday, Sunday, or legal holiday, the individual may execute the rollover on the following business day.

An individual receiving an eligible rollover distribution may rollover the entire amount received or any portion of the amount received. The amount of the eligible rollover distribution that is not rolled over to an IRA is generally included in the individual’s gross income and could be subject to a 10% early distribution penalty if the individual is under the age of 591/2.

How the 60-Day Rollover Works with a Self-Directed IRA

The tax attorneys at the IRA Financial Group will assist you in rolling over your 60-day eligible rollover distribution to a new FDIC and IRS approved IRA custodian. Once the 60-day eligible rollover distribution has been deposited with the new IRA custodian within the 60-day period, the new custodian will be able to invest the SEP IRA assets into the new IRA LLC “checkbook control” structure. Once the SEP IRA funds have been transferred to the new IRA LLC, you, as manager of the IRA LLC, you would have “checkbook control” over your retirement funds so you can make traditional as well as non-traditional investments tax-free and penalty-free.

Self-Directed IRA Transfer Experts

The tax attorneys at the IRA Financial Group will assist you in transferring your SEP IRA tax-free and penalty-free to a “checkbook control” self-directed IRA LLC solution. Each client of the IRA Financial Group will work directly with an assigned tax attorney to establish the Self-Directed IRA LLC solution and make sure that the self-directed IRA transaction is structured in the most tax efficient manner and is not in violation of any IRS rules.

To learn more about the Self-Directed IRA transfer or direct or indirect rollover rules, please contact a tax professional at 800-472-0646.

Jun 25

The SEP IRA vs. the Solo 401k

Two popular options for self-employed individuals looking to save for retirement are the Simplified Employment Pension or SEP IRA and the Solo 401k.  Here are some advantages and disadvantages of each plan.  Noting these differences may help you choose the best option for your situation of you have self-employed income.

The SEP IRA and Solo 401k are two options for self-employed peopleOne of the main differences is the contributions limits.  Both plans allow for an annual contribution of up to $51,000 for 2013.  However, a Solo 401k plan allows you to contribute more of your salary below that max.  Both allow you to contribute up to 25% of your earnings (20% for sole proprietors).  Moreover, the 401k allows you to contribute another $17,500.  Says author, Jonathan Ping: ““…you can make very little self-employed income and basically defer it all, which you can’t do with the SEP-IRA. This gives you that added flexibility which is especially beneficial for those who have some self-employed income as secondary income and want to get the most tax advantages. For example, if you made $15,000 of eligible compensation, you could sock all $15,000 of it away with a Self-Employed 401(k), but only $3,750 with a SEP-IRA.”  Therefore, if you have the ability to contribute a whole lot of money, a Solo 401k may be your best bet.

One of the major advantages of the SEP option is the ease in which you can set one up.  You can set up a SEP in just a few minutes online.  There’s a lot more paperwork involved when setting up a 401k plan.  This is a great option for freelancers.  Further, if you want to utilize a Solo 401k, according to the IRS, you must have “substantial, recurring” payments.  Failure to abide by the IRS code could lead to taxes and penalties from the IRS.  With a SEP IRA, there are no such rules.  You may contribute as much and as often as you want.  Plus, if your 401k plan has assets in excess of $250,000, you need to file IRS Form 5500.  There is less maintenance and administrative work with a SEP IRA, which may be a deciding factor for you.

Then there is the fees associated with 401k plans.  From the Wall Street Journal: ““Solo 401(k)s do in some cases have higher administration fees than SEP IRAs or other plans. Investors need to weigh whether they save aggressively enough to justify those fees.””.  Don’t forget those darn hidden 401k fees that we’re just learning about now.

One last thing to consider is if you own a small business and plan to add employees (other than your spouse), there are changes to be made with each type of plan.  When you do this with a Solo 401k, the plan is no longer solo and you must offer a traditional plan to all of your employees.  If you have a SEP IRA, you must contribute the same amount of money to your employee(s) as you do for yourself.

Still not convinced on which plan is best for you?  Contact the tax experts at the IRA Financial Group to get more info on both types of plans.  They are the country’s foremost expert in Solo 401k plans and self-directed IRAs.

Jun 24

“Self Directed IRA Transaction Review Service”

New “Transaction Review Service will help self-directed IRA clients verity that their proposed transaction will not violate any IRS prohibited transaction rules

The IRA Financial Group, the leading facilitator of self-directed IRAs with checkbook control has launched a new attorney Self Directed IRA Transaction Review service aimed specifically for the self-directed IRA investor. With the increase popularity in using self directed IRAs to make investments, such as real estate, an increasing number of individuals with retirement funds have been seeking expert tax advice concerning the IRS prohibited transaction rules.

IRA Financial Group Introduces "Self Directed IRA Transaction Review Service" for all New Self-Directed IRA InvestorsA recent U.S. Tax Court decision highlights the importance of working with professional tax advisers before using retirement funds to make an investment involving alternative assets. In Peek Vs. Commissioner, 140 T.C. No. 12, two Colorado taxpayers used IRA assets to help them buy a fire-safety business. In a May 9 opinion, a judge ruled that Messrs. Peek and Fleck engaged in a prohibited transaction that terminated their accounts when they bought the business . Because IRA Financial Group’s a self-directed IRA with “checkbook control” offers the IRA holder the ability to make a wide range of investment decisions, it’s important that the IRA investor know the rules governing them. As a result, the IRA Financial Group has designed the “Self-Directed IRA Transaction Review” service specifically for the self-directed IRA investor. “ When using a self-directed IRA LLC to make real estate and other non-traditional investments, we at the IRA Financial Group believe it is crucial that all our clients are able to have their IRA investment reviewed by a tax attorney, “ stated Adam Bergman, a tax attorney with the IRA Financial Group. “Because a self directed IRA investment requires the understanding of various tax rules which are based off the Internal Revenue Code and tax court cased, it is imperative that each of our clients are able to have their transaction reviewed to make sure it does not violate the IRS prohibited transaction rules, stated Mr. Bergman.

When it comes to making investments using a self directed IRA, the Internal Revenue Code does not describe what a self directed IRA could invest in, only what it cannot invest in. Internal Revenue Code Sections 408 & 4975 prohibits Disqualified Persons from engaging in certain type of IRA prohibited transactions. The purpose of these rules is to encourage the use of qualified retirement plans for accumulation of retirement savings and to prohibit those in control of self directed from taking advantage of the tax benefits for their personal account. “Our tax consultation service is predicated on working with the client to structure the most tax efficient self directed IRA transaction,” stated Maria Ritsi, a senior paralegal with the IRA Financial Group.

Clients of the IRA Financial Group will be automatically enrolled in our Self-Directed IRA Transaction Review” service . Each client will have direct and unlimited access to our in-house tax and ERISA attorneys. Each client of the IRA Financial Group is assigned a tax attorney in order to ensure that the self directed IRA transaction is established is in compliance with IRS rules. “Our clients have worked hard their whole life for their retirement funds and we are dedicated to offering individualized tax consultation regarding the IRS prohibited transaction rules”, stated Maria Ritsi of 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 and Dewey & LeBoeuf LLP.

IRA Financial Group is the market’s leading “Checkbook Control” Self Directed IRA and Solo 401k Plan Facilitator. We have 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 tax-free and 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.

Jun 21

Investing With Your Self-Directed IRA

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

Using a Self-Directed IRA LLC to make investments offers the investor the ability to make traditional as well as non-traditional investments, such as real estate, in a tax-efficient manner.  Tax deferred investments though a self-directed IRA LLC generally help investors generate higher returns. That’s because the money that would normally be used for tax payments is instead allowed to remain in the account and earn a return.

Use a self-directed IRA to buy real estate and other non-traditional investmentsReal Estate

The IRS permits using a Self-Directed IRA LLC to purchase real estate or raw land. Real estate is the most popular investment made with a Self-Directed IRA. Making a real estate investment is as simple as writing a check. Since you are the manager of your Self-Directed IRA LLC, you have the authority to make investment decisions on behalf of your IRA. One major advantage of purchasing real estate 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.

For example, if you purchased a piece of property with your Self-Directed IRA for $75,000 and later sold the property for $150,000, the $75,000 of gain 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 taxes and in most cases state income tax.

Tax Liens

The IRS permits the purchase of tax liens and tax deeds with a Self-Directed IRA LLC. By using a Self-Directed IRA LLC to purchase tax-liens or tax deeds, your profits are tax-deferred back into your retirement account 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 income and gains received would be tax-free.

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

Loans & Notes

The IRS permits the use of IRA funds to make loans or purchase notes from third parties. By using a Self-Directed IRA LLC to make loans or purchase notes from third parties, all interest payments received would be 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 interest received would be tax-free.

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

Use your IRA to invest in small businessesPrivate Businesses

With a Self-Directed IRA LLC you are permitted to purchase an interest in a privately held business. The business can be established as any entity other than an S Corporation (i.e. limited liability company, C Corporation, partnership, etc.). When investing in a private business using IRA funds, it is important to keep in mind the “Disqualified Person” and “Prohibited Transaction” rules under IRC 4975 and the Unrelated Business Taxable Income rules under IRC 512. The tax attorneys at the IRA Financial Group will work with you to develop the most tax-efficient structure for using your IRA to invest in a private business.

Precious Metals & Coins

Internal Revenue Code Section 408(m) lists the type of precious metals and coins that are permitted investments using IRA funds:

  • One, one-half, one-quarter or one-tenth ounce U.S. gold coins (American Gold Eagle coins are the only gold coins specifically approved for IRAs. Other gold coins, to be eligible as IRA investments, must be at least .995 fine (99.5% pure) and be legal tender coins.
  • one ounce silver coins minted by the Treasury Department;
  • any coin issued under the laws of any state;
  • a platinum coin described in 31 USCS 5112(k) ; and
  • gold, silver, platinum or palladium bullion (other than bullion that is made into a coin) of a certain fineness that is in the physical possession of a trustee that meets the requirements for IRA trustees under Code Sec. 408(a).

The Technical and Miscellaneous Revenue Act of 1998 allowed IRA owners to invest their IRA assets in certain platinum coins as well as certain gold, silver, platinum, or palladium bullion provided the coins are held in a financial organization.

The advantage of using a Self-Directed IRA LLC with “checkbook control” to purchase precious metals and/or coins is that their values generally keep up with, or exceed, inflation rates better than other investments. In addition, the metals and/or coins can be held in the name of the LLC at a financial organization (at any local bank) safe deposit box eliminating depository fees.

Foreign Currencies

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

Purchasing foreign currency, such as the Iraqi Dinar, with a Self-Directed IRA LLC is as easy as writing a check. As manager of the IRA LLC, you will have “checkbook control” over your IRA funds, providing you with the ability to make investments without requiring custodian consent. In addition, the foreign currency notes, including Iraqi Dinars, can be held in the name of the LLC at a financial organization (any local bank) safe deposit box eliminating depository fees.

By using a Self-Directed IRA LLC to purchase foreign currencies, such as the Iraqi Dinar, all foreign currency gains generated would be 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 foreign currency gains would be tax-free.

Carefully invest with your IRAStocks, Bonds, Mutual Funds, CDs

In addition to non-traditional investments such as real estate, a Self-Directed IRA LLC may purchase stock, bonds, mutual funds, and CDs. The advantage of using a Self-Directed IRA LLC with “Checkbook Control” is that you are not limited to just making these types of investments. With a Self-Directed IRA LLC with “checkbook control” you can open a stock trading account with any financial institution as well as purchase real estate, buy tax liens, or lend money to a third-party. Your investment opportunities are endless!

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

 

 

Jun 20

New Tax Court Case Reinforces IRS Validity of the Self-Directed IRA Structure

Peek Vs. Commissioner highlights IRA prohibited transaction rules for a personal loan guarantee but allows for investment through a self-directed IRA.

The recent Tax Court case Peek v. Commissioner (140 T.C. No. 12, May 9, 2013) reinforced the ability for a retirement account investor to use retirement funds to invest in a wholly owned entity without triggering a prohibited transaction. In the Peek case, the U.S. Tax Court ruled that a taxpayer’s personal guaranty of a loan by a corporation owned by the individual’s IRA is a prohibited transaction under section 4975(c)(1)(B). The Court found that the taxpayers had provided an indirect extension of credit to the IRAs, a prohibited transaction under Internal Revenue Code § 4975 that disqualified the IRAs. The Tax Court did not, however, have an issue with the taxpayer forming a special purpose corporation to make the investment as well as serve as director and registered agent of the corporation.

“Even though the Peek case centered on the IRA prohibited transaction rules, the Tax Court could have argued that establishing a special purpose entity wholly owned by a self directed IRA and managed by the IRA holder is a prohibited transaction, but it did not,” stated Adam Bergman, a tax attorney with the IRA Financial Group. “The Peek case is yet another Tax Court case that confirmed that an individual can use IRA funds to invest in a newly established entity and manage it without triggering the IRA prohibited transaction rules.”

New Tax Court Case Reinforces IRS Validity of the Self-Directed IRA StructureSection 4975(c) prohibits specified transactions between (i) various plans including IRAs and (ii) “disqualified persons” (or “parties in interest” under the ERISA version of these rules), which in the case of an IRA includes the IRA owner. Subject to certain exemptions, pursuant to Internal Revenue Code Section 4975, a disqualified person cannot engage in transactions with the plan that, among other things, constitute direct or indirect: (i) Sales, exchanges, or leasing of property; (ii) Lending of money or other extension of credit; (iii) Furnishing of goods, services, or facilities; or (iv) Transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a plan.

In the Peek Case, two taxpayers, Mr. Lawrence Peek and Darrel Fleck sought to use self-directed IRAs to acquire a business. The taxpayers established self-directed IRAs using 401(k) rollovers, created a new company (FP Company), and then directed the IRAs to purchase the common stock of FP Company with the cash in the IRAs. FP Company then sought to purchase the business. To consummate the purchase, in addition to the cash and other credit lines, FP Company provided a promissory note to the sellers. This promissory note was backed by the personal guarantee of the taxpayers, and the guarantees were then backed by the deeds to the taxpayers’ homes. The IRS argued that Mr. Fleck’s and Mr. Peek’s personal guarantee of a $200,000 promissory note from FP Company to the sellers of the business in 2001 as part of FP Company’s purchase of the business assets were prohibited transactions. Tax Court agreed with the IRS and found that the taxpayers had committed prohibited transactions.

“The Peek case also adds to the limited guidance on the situations in which “indirect” transactions fall within Internal Revenue Code Section 4975, “ stated Mr. Bergman

According to Mr. Bergman, “Peek highlighted the importance of working with independent tax attorneys who can properly advise on a proposed investment. Mr. Peek and Mr. Fleck relied on the advice of Mr. Blees, a CPA, who was also the promoter of the transaction. As a result, Mr. Blees did not warn Mr. Peek and Mr. Fleck about personally guaranteeing the business loan for their IRA investment.”

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 and Dewey & LeBoeuf LLP.

IRA Financial Group is the market’s leading “Checkbook Control” Self Directed IRA and Solo 401k Plan Facilitator. We have 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 tax-free and 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.

Jun 19

How The Self-Directed IRA Structure Works

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

1. Tax-Free Transfer of Funds.

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

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

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

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

2. Creation of the Self-Directed IRA LLC:

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

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

3. Open a local bank account for the LLC

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

4. Transfer of IRA Funds to New LLC Bank Account

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

5. Appointment of Manager of LLC

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

6. Self-Directed IRA Investment is Made

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

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

Self Directd IRA LLC Structure

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

Chart

Jun 18

Retirement Planning for Stay-at-Home Dads

Hoping all the dads out there had a wonderful Father’s Day this past Sunday.  This goes out especially to the growing number of stay-at-home dads!  There are about 176,000 as of a 2011 Census.  While that only represents about 3.4% of the stay-at-home parent population, the number has doubled this century.  There are many perks to being a stay-at-home dad, however there are some obvious drawbacks: no paycheck and no company retirement plan such as a 401(k).  There are ways to save for retirement though!

If you funded a 401k before leaving the workforce, you may be able to leave the plan with your old employer.  However, you are limited as to what you can do with it.  A smarter option would be to roll it over into an IRA account.  IRAs are generally cheaper to maintain and offer you more investment options.  Plus, you can shop around and find a plan that works best for you.  Further, it’s easier to convert to a Roth option if you so choose.

You may only contribute to an IRA if you have earned income though.  You’re out of luck then, right?  Not so fast!  Assuming your wife works, you may contribute to a Spousal IRA.  The maximum you can contribute to any IRA for 2013 is $5,500 (plus another $1,000 if you are at least 50 years old).  So not only can your wife contribute to an IRA of her own, she may also contribute to one on your behalf.

Another option is to start your own business.  Many dads still want to stay in the workforce and use their expertise to open a small business of their own.  Now you’ll have your own earned income to contribute to an IRA.  Assuming you are a sole proprietor, you can open several types of IRAs, including a SEP IRA and a Self-Directed IRA.

Just because you’re a stay-at-home dad, doesn’t mean you can’t prepare yourself for retirement.  There are many options out there for you.  Contact the tax experts at the IRA Financial Group to see what you can do to better prepare you and your family for a comfortable retirement.

Jun 17

The Self-Directed Roth IRA LLC Advantage

Here are some of the advantages of using a Self-Directed Roth IRA LLC:

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

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Self-Directed Roth IRA LLC Structure

 

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

 

Self Directed IRA LLC

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