May 29

Some Retirement Tips for the Self-Employed

If you are self-employed (according to Career Builder, there’s about 10 million of you), you might not have retirement savings near the top of your to-do list.  This is a huge mistake!  Even though you don’t have an employer-sponsored 401(k) or similar plan available to you, there are options for saving for your retirement.  Here are a few tips from wallstcheatsheet.com.

There are a variety of retirement plans for the self-employedFirst and foremost is to get started now!  Every year you delay saving for retirement will cost you big time.  Thanks to the power of compounding, a smaller contribution now is worth more than a larger one five or ten years down the road.  The earlier you start the more your money will work for you.  Saving $2,000 per year in an IRA for 35 years will give you a pre-tax balance of $315,000.  If you started five years earlier, you would have $450,000.

Next, you need to consider your income and whether it stays constant throughout the year or changes quarter to quarter or year to year.  A SEP IRA may be best if your income varies while a Solo 401(k) is better if your income stays the same.  Note that rules state that you cannot have employees (other than your spouse) to contribute to a Solo 401(k).

Then it’s important to check out the numbers of the plans: contribution limits, tax implications and percentages for example.  As an employer, a SEP IRA allows you to contribute up to $52,000 or 25% of net earnings, (whichever is lower).  Employees cannot contribute to a SEP.  On the other hand, you may contribute, as an employee, to a Solo 401(k) up to $17,500 (or $23,000 if you are age 50+).  Plus, a 25% non-elective employer contribution.  That way, you can contribute both as the employer and an employee.

It’s important to figure out which type of plan is best for you.  This is where a financial adviser can help run numbers and see how you can make the most of you contributions both now and in the future.  Tax implications play a large roll in deciding how and what to contribute.  Paying taxes now might benefit some while deferring them might be better for others.

Lastly, don’t forget to take inflation in to account.  You might have a set number in mind of what you’ll need to retire on.  However, twenty or thirty years down the line might cut the buying power of today’s dollar in half.  If you think you need $500,000 to retire on right now, that may very well be $1,000,000 by the time you stop working.  The worst thing that can happen is to run out of money after you retire.

If you’re self-employed and not saving for retirement, it’s time to get started now.  The tax experts at the IRA Financial Group can help you plan the best way to save for your golden years.  They offer a wide variety of account types and will work with you to figure out which is right for your unique situation and goals.  Contact them @ 800.472.0646 or visit their website today!

May 28

Self-Directed IRA Fraud Alert Detector

The IRA Financial Group encourages each investor to review the following questions when considering an investment. Because it is not the responsibility of IRA Financial Group to provide investment analysis or recommendations or to perform due diligence concerning your investment decisions, the questions have been designed to help you in your efforts to evaluate the soundness, prudence and merit of your investments.

Please note that this is not a comprehensive list of questions but simply a starting point. The answers to these questions are not a substitute for your own due diligence. We also strongly encourage investors to make use of legal, tax and financial advisors to support these efforts.

Always take the time you need to understand and evaluate a potential investment. Make sure you understand the investment you will be making and thoroughly understand how the promoter will be able to generate the returns being promised. Also, make sure the promoter of the investment has the necessary qualifications or licenses, if applicable, to offer the investment. Be cautious if a sponsor or advisor uses the affiliation as the reason to make the investment, rather than relying on the underlying merits of the investment or trust in the sales person.

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May 27

Delta Airline Pilots Turning to IRA Financial Group to Help Establish Self-Directed Retirement Plans with Defined Contribution Plan Funds

Delta Airline pilots looking to invest their defined contribution retirement monies into nontraditional investments, such as real estate looking to self-directed IRA

IRA Financial Group, the leading provider of self-directed IRA LLC “checkbook control” structures has seen a growing number of Delta Airline pilots looking to invest their defined contribution funds in a self-directed IRA LLC. In light of Delta Airlines decision to end their defined contribution plan as of December 31, 2013, Delta Airline pilots that have participated in the defined contribution plan have until June 13, 2014 to notify Delta Airlines whether the funds will be rolled into another Delta 401(k) retirement plan or whether the funds will be rolled into an IRA, such as a self-directed IRA. “Over the last several weeks, we have helped numerous Delta Airline pilots establish self-directed IRA LLC solutions to make real estate and other investments with their retirement funds, “ stated Adam Bergman, a tax partner with the IRA Financial Group.

The Plan Sponsor (AFA) has provided Delta Airline pilots with three general options: (1) rollover existing retirement funds into a qualified IRA; (2) rollover retirement funds into the Plan Sponsor’s existing 401(k) plan qualified plan or (3) receive a taxable lump sum distribution.

Delta Airline Pilots Turning to IRA Financial Group to Help Establish Self-Directed Retirement Plans with Defined Contribution Plan Funds IRA Financial Group’s self directed IRA LLC offers Delta Airline pilots 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, including real estate. The IRS only describes the type of investments that are prohibited, which are very few.

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

“With IRA Financial Group’s self-directed IRA LLC solution, investors can make real estate and other investments and generate income and gains while deferring taxes,” stated Mr. Bergman. “ One major advantage of using a Self-Directed IRA to make investments is that all income and generated by the investment is generally 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.

“Delta Airline pilots are using the termination of their defined contribution plan as a way to better diversify their retirement portfolio through the use of a self-directed IRA,“ 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. With our work experience at some of the largest law firms in the country, our attorneys legal and tax knowledge in this area is unmatched.

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

May 23

Living in IRA-Owned Real Estate After You Retire

Here’s a great story from biggerpockets.com about what you can do with your IRA-owned real estate when you retire:

That rental property has served your retirement plan well, not only appreciating in value over time, but most importantly providing regular monthly cash flows over a number of years, and seemingly promising to do so indefinitely.

But what if you’ve decided you really want to retire and live in that house? Since, after all, your IRA owns it!

When you know that your objective is to live in the property acquired by your IRA, the easiest way to accomplish this is to make the investment in your Roth IRA, to begin with – since once you’ve held the Roth IRA for 5 years and turned 59 ½, it’s yours, free and clear (no tax or penalties to withdraw).

Of course, wouldn’t you know it? Your real estate assets held in your Traditional IRA, however. So what are your options then?

Certainly, you can distribute the house once you’re 59 ½, without paying any premature withdrawal penalties. But you’ll have to pay taxes on the dollar amount (property value) of your withdrawal, as though that amount was some cash added to your income in the year you take it. Naturally, since we’re talking about thousands of dollars, this may be more costly to you than it’s worth.

Here are 3 options to help you get there:

1) Do you realize that you can distribute your IRA’s holdings a little bit at a time? For example, at age 59 ½, you could begin distributing 10% of the property from your IRA, each year.If you distributed 10% in year one of such a program, this would result in the property being owned 90% by your IRA, and now 10% share is owned by YOU. You’ll need to arrange with the title company so that the ownership share is properly reflected anew, each year. You’ll still be constrained from using the property personally until it is entirely divested from the IRA, and thus is fully in your name.

But this will have allowed you to spread the tax burden from distributions over a 10-year period, leaving you free to enjoy your retirement property, bought and paid for.

Moreover, this will change your monthly cash flows. You will personally be entitled to a direct 10% of income and responsible for 10% of expenses. These proportions would need to be honored since there are now two investors, you and your IRA.

2) You could consider converting a portion of your IRA (including that real estate asset) to a Roth IRA. Yes, you’ll pay income tax on the amount you convert, but this may make sense for you, if you anticipate a number of years more of income to sock away, and for your IRA’s value to grow, before reaching age 59 ½. The point here is you are paying some tax now on a smaller amount, instead of paying tax now on a much larger amount, down the road at retirement.

What is more, you could convert a fractional share from your IRA to a Roth IRA, each year, so that at some point in the future your Roth IRA owns the entire property. Then, if you’ve reached age 59 ½ with 5 years in that Roth IRA, it’s available to withdraw, free from penalty or tax.

3) You may even elect to begin distributing shares of your property even before retirement age, by electing to do so using the 72T method. The IRS grants the 72T method (‘substantially equal payments’) as an exception, which enables one to avoid the penalty for early IRA withdrawals.

YOU HAVE SOME WAYS TO STRATEGIZE!

The 72T exception offers a choice of methods, which you can use to tailor the timeline of your distributions. All are based on your life expectancy (or, if you elect, on the joint life expectancy of you and your beneficiary), and whichever method you choose must be continued for at least 5 years or until reaching age 59 1/2.

Your tax advisor can help you determine if one of these options makes sense for you. Best of Luck!

Remember, not all custodians allow you to purchase real estate!  However, with a Self-Directed IRA from the IRA Financial Group, you can invest in just about anything, including real estate.  Contact us today @ 800.472.0646 to get started on financial freedom during retirement.

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May 22

Tax Strategies for Your Roth IRA

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:

The 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 one of our IRA Experts at 800-472-0646.

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May 20

Settling Real Estate Market Helping to Increase Demand for Real Estate From Self-Directed IRA LLC Investors

The real estate market has settled down in 2014 triggering increased interest from more conservative self-directed IRA investors

IRA Financial Group, the leading facilitator of self-directed IRA LLC solutions, has seen a surge of clients interested in using the retirement funds to purchase real estate in 2014 in light of the settling of the real estate markets, according to an internal IRA Financial Group study. Over the first-half of 2014, IRA Financial Group’s clients have invested over $250 million dollars in real estate investments throughout the United States. “We have seen a surge in new self-directed IRA clients looking to use their retirement funds to purchase real estate in light of a more settled real estate market, “ stated Jacky Ospina, a tax specialist with the IRA Financial Group. “We have heard from our retirement investors who have been more comfortable in investing in real estate in 2014 because of the perceived stability in the market, “ stated Ms. Ospina

The primary advantage of using a Self Directed IRA LLC to make investments is that all income and gains associated with the IRA investment grow tax-deferred.

Settling Real Estate Market Helping to Increase Demand for Real Estate From Self-Directed IRA LLC InvestorsWith IRA Financial Group’s self directed IRA LLC solution, traditional IRA or Roth IRA funds can be used to buy a vacation property tax-free. “With depressed real estate prices, many retirement investors are looking to buy their dream retirement home with IRA funds as a year-end tax planning solution stated, Adam Bergman, a tax attorney wit the IRA financial Group. “ “Using a Self Directed IRA LLC to buy real estate presents a number of exciting tax planning opportunities, “ stated Ms. Ospina.

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 checkbook 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 self directed IRA LLC with “checkbook control” solution to make real estate investments offers a number of very interesting investment opportunities, including the ability to diversify ones retirement portfolio with real estate, precious metals, and other alternative investment options.

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 by making self directed IRA investments 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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May 16

FAQs About a Rollover IRA

What is a Rollover IRA?

To permit tax-free transfers of retirement savings from one type of investment to another, as well as to increase the portability of qualified plan rights for employees moving from one job to another, Congress included a complicated web of rollover provisions in ERISA. These provisions cover transfers from one IRA to another, transfers from qualified pension, profit-sharing, stock bonus, and annuity plans to IRAs, and transfers from IRAs to qualified plans. An IRA may also, under limited circumstances, make a rollover distribution to a health savings account (HSA). In other words, if you receive a distribution from a qualified plan, you might decide to put some or all of the distribution amount into an IRA. The IRA that receives the qualified plan distribution is called a rollover IRA.

Can I rollover funds from a Traditional IRA to another Traditional IRA?

A distribution from an IRA to the individual for whose benefit the account or annuity is maintained is not taxable to the recipient if reinvested within 60 days in another IRA (other than an endowment contract) for the benefit of the same individual. The rule operates on an all-or-nothing basis. The entire amount received from the old IRA must be transferred to the transferee IRA. If anything is held back, the rollover rule does not apply, and everything received from the old IRA, including any amount transferred to another IRA, is treated as a taxable distribution. However, the distribution from the old IRA need not include the taxpayer’s entire interest. An IRA can be split, for example, by rolling a portion of it into a new IRA.

If property other than money is received from the old IRA, that property, not substitute property of equal value or the cash proceeds of the property’s sale, must be included in the transfer to the new IRA. According to the Tax Court, the rollover contribution must be of cash if the distribution is in cash.

The privilege of rolling over from IRA to IRA may be exercised only once in a 12-month period.

The Rollover IRA FAQsCan I rollover funds from a qualified plan (401(k) Plan) to a Traditional IRA?

Very generally, a qualified plan or annuity participant can roll over any distribution other than a distribution that is part of a series of payments over the distributee’s life or life expectancy or over a fixed period of at least 10 years, a distribution required by the minimum distribution rules of Internal Revenue Code Section 401(a)(9) , or a hardship distribution. An employee’s surviving spouse may also roll over a similar distribution received on account of the employee’s death.

Can I rollover a Traditional IRA I inherited?

A taxpayer whose interest in an IRA is as beneficiary of the person who created the IRA is generally denied the privilege of rolling over tax free from the IRA to another type IRA or a qualified plan or tax-deferred annuity, except that a surviving spouse may roll over to another IRA but not a qualified plan. Because the tax allowances for IRAs (including an IRA’s tax exemption) are intended to encourage saving for the retirement of the contributor and surviving spouse, Congress decided it was inappropriate to allow the tax exemption to be prolonged by rollovers after the contributor has died and the account has passed into the hands of a person other than a surviving spouse.

What are the Rollover rules for Roth IRA?

The contribution limitation does not apply to a “qualified rollover contribution,” but no rollover contribution other than a qualified rollover contribution is permitted. The term “qualified rollover contribution” includes only the following:

  • A rollover contribution from another Roth IRA.
  • A rollover contribution from a traditional IRA that satisfies the requirements for a rollover from one traditional IRA to another.
  • A rollover contribution from a qualified pension, profit-sharing, stock bonus, or annuity plan (qualified plan), tax-deferred annuity, or eligible deferred compensation plan that satisfies the requirements for rollovers from the particular type of plan.
  • A contribution to a Roth IRA by an individual who has received a military death gratuity.

A qualified rollover must satisfy all of the requirements for rollovers of and into IRAs generally, which means, for example, that a rollover contribution must made within 60 days of the rolled-over distribution and the rollover privilege is denied to beneficiaries of IRA owners (other than surviving spouses). For years beginning before 2010, an individual may not make a qualified rollover from a traditional IRA, qualified plan, tax-deferred annuity, or eligible deferred compensation plan to a Roth IRA for his or her benefit if his or her adjusted gross income for the year exceeds $100,000.

Who qualifies for a rollover from a Traditional IRA to a Roth IRA?

Starting in 2011, everyone qualifies to convert to a Roth IRA. As with any rollover, you will want to arrange a direct rollover from the plan to the Roth IRA to avoid mandatory income tax withholding and not worry about the 60-day window which the transfer must be completed.

Do I pay tax when I rollover a Traditional IRA into a Roth IRA?

Yes. A distribution rolled over to a Roth IRA from a traditional IRA, qualified plan, tax-deferred annuity, or eligible deferred compensation plan is included in gross income (although not adjusted gross income for purposes of the $100,000 ceiling). A traditional IRA can be converted into a Roth IRA, but the conversion is treated as a distribution from the traditional IRA and a rollover contribution to the Roth IRA.

Starting in 2010, everyone qualifies to convert to a Roth IRA. As with any rollover, you will want to arrange a direct rollover from the plan to the Roth IRA to avoid mandatory income tax withholding and not worry about the 60-day window which the transfer must be completed.

A rollover or conversion from a traditional IRA to a Roth IRA is usually advantageous for taxpayers who can pay the resulting tax from other funds. Assume A, who is taxed at 30 percent at all relevant times, converts a traditional IRA containing $100,000 into a Roth IRA and pays the resulting $30,000 tax from other funds. Before the conversion, each dollar of income accumulated in the IRA faced a 30 percent tax on distribution, but the conversion eliminates this prospect. A accomplishes this by effectively investing an additional $30,000, after taxes, in the IRA, but this $30,000 will itself produce earnings within the IRA on which A will never be taxed. The conversion thus has the effect of a $30,000 nondeductible contribution to the Roth IRA, free of the usual annual ceiling on IRA contributions. The conversion is also advantageous if the taxpayer is taxed at a lesser rate for the year of the conversion than is expected in the year or years of ultimate distribution (e.g., because of losses or other large deductions in the year of the rollover or conversion).

If an amount “properly allocable” to a traditional-to-Roth rollover is distributed during the year of the rollover or any of the succeeding four years, the early distribution penalty tax of Internal Revenue Code Section 72(t) applies as if the entire distribution (or, if less, the gross income recognized at the time of the rollover) were included in gross income. The deemed gross income is taxed under Internal Revenue Code Section 72(t) unless the distribution is made after the owner of the IRA attains age 59 1/2 , becomes disabled, or dies or some other exception from the penalty applies.

For more information about the Rollover IRA, please contact a retirement expert from the IRA Financial Group @ 800.472.0646.

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May 15

Clients Saving Hundreds of Dollars Each Year with “Checkbook Control“ Self-Directed IRA LLC

Self-Directed IRA LLC structure offers cost effective options for retirement investments, such as real estate, gold, and hard money lending versus a custodian controlled self-directed IRA.

IRA Financial Group, the leading provider of “checkbook control” self-directed IRA LLC announces the result of its internal report which examined the fees associated with a number of full service self-directed custodian and found that its “checkbook control” IRA clients saved hundreds of dollars each year in IRA account fees by establishing a self-directed IRA LLC “checkbook control” account versus establishing an account at a custodian controlled self-directed IRA custodian.

IRA Financial Group Report Shows Clients Saving Hundreds of Dollars Each Year with “Checkbook Control“ Self-Directed IRA LLC There are essentially two ways to make non-traditional investments, such as buying real estate or precious metals with a self-directed IRA: (1) An IRA custodian controlled self-directed IRA, which typically involves a special financial institution or IRA administrator will serve as the custodian of the IRA. With a custodian controlled Self-Directed IRA, the IRA funds are generally held with the IRA custodian and the IRA custodian, at the IRA holder’s direction, will then invest those IRA funds accordingly. The IRA custodian is involved in every facet of the self-directed IRA transaction from signing checks to documentation and the account fees are typically asset and transaction based. (2) A “checkbook control” self-directed IRA LLC that offers the IRA holder with more control and cost efficiency when making IRA investments.

Under the self-directed IRA LLC “checkbook control” structure, the IRA is set up as a self-directed account that’s capitalized by funds rolled over from a current retirement account. Then, a LLC is created in which your new IRA purchases all the membership units/interests. At that point, the IRA funds are held in an LLC bank account and are ready to invest at your discretion. A “checkbook control” Self Directed IRA real estate allows one the ability to eliminate the delays associated with an IRA custodian, enabling the IRA holder to act quickly when the right investment opportunity presents itself.

According to Susan Glass, a retirement tax specialist with the IRA Financial Group, one of the main advantages of using a “checkbook control” IRA LLC is the cost savings associated with the IRA account. “Because the “checkbook control” IRA LLC is established at a local bank and the individual IRA holder and not the IRA custodian is involved in the transaction, the fees associated with establishing and maintaining a “checkbook control” IRA LLC is significantly less expensive than a custodian controlled self-directed IRA.”
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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May 14

Some Common Prohibited Transactions For Your IRA

Categories of Prohibited Transactions

In general, the type of transactions that could fall under the prohibited transaction rules pursuant to Code Section 4975 can be viewed in the context of three unofficial categories:

Direct Prohibited Transactions

4975(c)(1)(A): The direct or indirect Sale, exchange, or leasing of property between an IRA and a “disqualified person”

  • Ben leases an interest in a piece of property owned by his Self Directed IRA to his son
  • Jen sells real estate owned by her Self-Directed IRA to her father
  • Todd sells real estate he owns personally to his Self-Directed IRA
  • Carl transfers property he owns personally to his Self-Directed IRA
  • Mary Purchases real estate with her IRA funds and leases it to her mother
  • Kevin uses his Self-Directed IRA funds to purchase an interest in an entity owned by his wife
  • Peter Transfers property he owns personally subject to a mortgage to his Self-Directed IRA.
  • Tracy uses personal funds to pay expenses related to her Self Directed IRA real estate investment
  • Lara uses personal funds to pay taxes and expenses related to her Self-Directed IRA real estate investment

4975(c)(1)(B): The direct or indirect lending of money or other extension of credit between an IRA and a “disqualified person”

4975(c)(1)(C): The direct or indirect furnishing of goods, services, or facilities between an IRA and a “disqualified person”

  • Dan purchases real estate with his Self-Directed IRA funds and personally makes repairs on the property
  • Larry purchases a condo with his Self-Directed IRA funds and paints the walls without receiving a fee
  • Kris buys a piece of property with his Self-Directed IRA funds and hires his son to work on the property
  • Karen buys a home with her Self-Directed IRA funds and her son makes repairs for free
  • Lisa owns an office building with her Self-Directed IRA and hires her son to manage the property for a fee
  • Shari owns an apartment building with her Self-Directed IRA funds and has her father manage the property for free
  • Joe receives compensation from his Self-Directed IRA for investment advice
  • Troy acts as the real estate agent for his Self Directed IRA

4975(c)(1)(D): The direct or indirect transfer to a “disqualified person” of income or assets of an IRA

  • Steve uses a house owned by his Self Directed IRA for personal uses
  • Tim deposits Self-Directed IRA funds in to his personal bank account
  • Pat is in a financial jam and takes $12,000 from his Self-Directed IRA to pay a personal debt
  • Mark buys precious metals using his Self-Directed IRA funds and uses them for personal gain
  • Jack purchases a vacation home with his Self-Directed Self Directed IRA funds and stays in the home on occasion
  • Amy buys a cottage on the lake using her Self Directed IRA and rents it out to her daughter and son-in-law
  • Sylvia purchases a condo on the beach with her Self Directed IRA funds and lets her son use it for free
  • Richard uses his Self-Directed IRA to purchase a rental property and hires his friend to manage the property. The friend then enters into a contract with Richard and transfers those funds back to Richard
  • Pam invests her Self-Directed IRA funds in an investment fund and then receives a salary for managing the fund.
  • Charles uses his Self-Directed IRA funds to purchase real estate and earns a commission as the real estate agent on the sale
  • Keith uses his Self-Directed IRA funds to lend money to a company he owns and controls
  • John invests his Self-Directed IRA funds into a business he owns 75% of and manages

Self-Dealing Prohibited Transactions

4975(c)(1)(E): The direct or indirect act by a “Disqualified Person” who is a fiduciary whereby he/she deals with income or assets of the IRA in his/her own interest or for his/her own account

  • Sara makes an investment using her Self-Directed IRA funds into a company she controls which will benefit her personally
  • Jason uses his Self-Directed IRA funds to invest in a partnership with himself personally in which he and his family will own greater than 50% of the partnership
  • Helen uses her Self-Directed IRA funds to invest in a business she and her husband own and operates and her and her husband earns compensation from the business
  • Steve uses his Self-Directed IRA funds to lend money to a business in which he controls and manages
  • Victor invests his Self-Directed IRA funds in a trust in which Victor and his wife would gain a personal benefit
  • Brenda uses her Self-Directed IRA funds to invest in a real estate fund managed by her Son. Brenda’s son receives a bonus for securing her investment.
  • Frank invests his Self-Directed IRA funds into a real estate project that his development company will be involved in order to secure the contract
  • Ryan uses his Self-Directed IRA funds to invest in his son’s business that is in financial trouble
  • David uses his Self-Directed IRA funds to buy a note on a piece of property for which he is the debtor personally

Conflict of Interest Prohibited Transactions

Subject to the exemptions under Internal Revenue Code Section 4975(d), a “Conflict of Interest Prohibited Transaction” generally involves one of the following:

4975(c)(i)(F): Receipt of any consideration by a “Disqualified Person” who is a fiduciary for his/her own account from any party dealing with the IRA in connection with a transaction involving income or assets of the IRA

  • Jay invests his Self-Directed IRA funds into a corporation in which he manages and controls but owns a small interest in
  • Betty uses her Self-Directed IRA funds to loan money to a company she owns a small interest in but manages and controls the daily operations of the company
  • Sally uses her Self-Directed IRA to lend money to a business that she works for in order to secure a promotion
  • Lance uses his Self-Directed IRA funds to invest in a real estate fund that he manages and where his management fee is based on the total value of the fund’s assets.

For more information on prohibited transactions, please contact an IRA Expert at 800-472-0646.

May 12

Self-Directed Roth IRA Investors Turning to Home Rental Market for Strong Returns without Tax

Self-directed Roth IRA investors taking advantage of hot housing rental market in light of restricted lending market

IRA Financial Group, the leading provider of “checkbook control” self-directed IRA and self-directed Roth IRA LLC solutions has seen an increasing number of Roth IRA LLC investors using their retirement funds to purchase real estate with after-tax funds so that all the rental income would flow back to their Roth IRA LLC without tax. According to a number of clients the reason for the strong demand for rental properties is due to the lack of financing available for home buyers resulting in strong rental opportunities. “We have seen an increasing number of self-directed Roth IRA purchasing rental properties as a means of taking advantage of the hot rental market as well as securing a strong tax-free stream of income to live off, “ stated Adam Bergman, a tax partner of the IRA Financial Group.

Self-Directed Roth IRA Investors Turning to Home Rental Market for Strong Returns without Tax, According to IRA Financial Group IRA Financial Group’s Self-Directed Roth 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 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 generate 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 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

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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