Todd Senff, Real Estate Channel Manager, at Equity Trust Company writes: “Historically, real estate has given many Americans a stable investment vehicle that provides both income and appreciation. One of the greatest tools available to real estate investors is government-sponsored retirement plans, such as IRAs and 401(k)s, which can provide generous tax-advantages to their investment. . . . 7 Things to Know When Planning to Self-Direct IRA in Real Estate.”
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Equity Trust Company: “If your . . . IRA owns an asset or interest that produces unrelated business taxable income (UBTI), their IRA may be subject to an unrelated business income tax (UBIT) pursuant to Section 511-514 of the Internal Revenue Code. However, before we can address the tax, we must first identify situations when unrelated business taxable income is generated. Ann Siford, Manager of Professional Network at Equity Trust Company writes: “Precious metals have long been considered one of the few ways to protect assets from high inflation and economic uncertainty. Clients are investing their IRAs in gold, silver and more. . . . The only thing certain about today’s market is its uncertainty. To mitigate this questionable time, more clients and their advisors are seeking precious metals as an asset class to further diversify their retirement portfolio. Precious metals are often attractive to investors because of their liquidity. A self-directed IRA can hold gold, silver, platinum and palladium bullion which meet minimum fineness requirements.” Gene Fox, President of Triple Net Houses writes: “The key to this unique strategy is utilizing the long-used triple net lease, which is used commonly by real estate investors on commercial properties, such as Dollar General Stores and fast food restaurants. Triple Net Houses takes that same leasing principle, but transfers it to single-family homes. Investors can now get all the benefits of owning rental properties, without the hassles of managing or maintaining them.” Ned Coyle, Commercial RE Investment Specialist, writes: “Have you considered investing in a commercial real estate property only to back-off because you didn’t want the management hassles? OK, fair enough. Did you then invest those funds in the stock market, perhaps a Real Estate Investment Trust (REIT) because it was the easy thing to do? No one has to tell you the direction your stock portfolio has taken, right? It probably has about the same value today as it did in 2002. Where would your net worth be today if you had taken a portion of those funds and invested it in real estate? We are not talking a REIT stock here but a purchase, in a fee simple manner, of a commercial office, retail or light industrial distribution property.” Laurie Bachelder, Principal of NUA Advisors, LLC, writes: “Investors tired of watching their retirement accounts ride the Wall St. rollercoaster are searching for other ways to create wealth in their retirement accounts. If you turn to most business or financial publications or websites you will find many articles about investing in real estate with a Self Directed Retirement Account (‘SDRA’). The majority of articles written about investing with a SDRA pertain to real estate as a popular choice for an alternative investment, and why wouldn’t it be. Real estate offers several advantages.” Ann Siford, Manager of Professional Network at Equity Trust Company writes: “A self-directed IRA allows investors to directly manage their retirement portfolio, diversifying beyond the traditional mutual funds, stocks and bonds to include assets such as real estate, promissory notes, tax liens, private placements and oil/gas. . . . IRS Rules You Need to Know. Wall St. Journal: “Is there a Ponzi scheme lurking in your IRA? That may sound like a bizarre question. But in recent years, a number of well-off professionals and their families have been ensnared in frauds that prey on individual retirement accounts, according to securities lawyers and firms that manage these accounts. The vehicle typically targeted by such schemes is a self-directed IRA . . . .” A glossary of terms used in connection with traditional IRAs, Roth IRAs, 401(k)s, and other retirement accounts. About: See PENSCO’s company profile web page. Pensco Preferred Provider: Richard Keyt, the author of this website, is a Pensco Trust Preferred Professional Phone: (866) 818-4472. If you do not currently have a PENSCO account and would like a free consultation to learn about its services and how to open an account, call PENSCO Trust’s Business Development Center. Website: www.penscotrust.com Email: takecontrol@pensco.com Mailing Address: PENSCO Trust Company Street Address: PENSCO Trust Company Caveat: Neither KEYTLaw, LLC, nor Richard Keyt recommends the above company to act as a custodian of any IRA account. The above company is listed on this IRA LLC Law website because Richard Keyt has formed at least one IRA LLC in which a member has been the above company as the custodian of an IRA. An IRS private letter rulings (PLRs) is a statement by the IRS given to a taxpayer who submitted a request to the IRS for it’s position with respect to one or more federal tax issues set forth in the PLR. The PLR process is a way for a taxpayer to determine in advance of taking action if the proposed action will cause a problem with the IRS. PLRs annot be relied on by any person except the person who applied for and obtained the PLR. Although PLRs do not have any precedential value, they are instructive because they do indicate IRS thinking with respect to the issues addressed in the PLR. IRS Private Letter Rulings 200732026 and 200732027: IRS Private Letter Ruling 200705032: IRS Private Letter Ruling 200652028: IRS Private Letter Ruling 200650023: IRS Private Letter Ruling 200217059 January 31, 2002: IRS Letter Ruling 200151049, August 21, 2001 August 21, 2001″ IRS Letter Ruling 200027061 April 12, 2000″ IRS Letter Ruling 200008044, December 3, 1999 December 3, 1999: IRS Letter Ruling 199929029, April 27, 1999 April 27, 1999: Forbes: “Got an ex-employer retirement account sitting around? You can convert it–and maybe your current 401(k), too–into a Roth IRA. Are you one of the 15 million Americans who has a 401(k) left behind with an ex-employer? Alternatively: Does your current company allow you to make “in-service” rollovers from its 401(k) to an individual retirement account? (Most employers do allow such rollovers for workers 59.5 or older, and a minority allow them for younger workers.) Either way, you may have a tax-saving option you haven’t heard about: converting an old 401(k) or part of a current one into a Roth IRA.” Forbes: “Sure it might make sense to take the tax hit now and get into a Roth IRA, but don’t blindly trust what your broker suggests. Much has been written about Roth conversion opportunities in 2010. It seems every product manufacturer and annuity pitchman in the country is recommending some variation of a Roth conversion strategy. Many such schemes, which masquerade as advice, are but hollow mockeries designed to line the pockets of product manufacturers, their salesmen, and the U.S. Treasury. Legitimate Roth conversion strategies do exist, but they are the exception rather than the rule.” Forbes: ” I was a guest on an estate planning radio show recently when a listener from Traverse City, Mich., phoned with an eye-opening question. ‘Do I have to convert a traditional IRA to a Roth to make it a ‘stretch’ IRA?‘ she asked. The short answer is: Absolutely not. But what a wake-up call! It made me realize that, with all the talk this year about Roth conversions, plenty of well-informed people are understandably confused about this issue. Forbes: “Should you convert your traditional IRA to a Roth? Often, the answer requires complicated calculations. Here’s an easy way to do them.” Forbes: “After you grab your employer’s 401(k) match, it’s time to fund an IRA. But which kind is best? Almost everyone who has earned income can benefit from using an Individual Retirement Arrangement, or, as they’re more commonly called, an Individual Retirement Account. IRAs come in several different versions, each with its own tax treatment and rules on who can contribute. Here is a comparison of some of those features:” Forbes: “More Americans will be handing down IRAs to their kids. A new decision suggests it might be a creditor proof inheritance. But nothing is certain yet. In what estate planners and bankruptcy lawyers are saying could be a significant case, a federal bankruptcy judge in Minnesota has allowed a bankrupt woman to keep a $63,000 individual retirement account inherited from her father. IRAs inherited from someone other than your spouse have traditionally not been protected in bankruptcy under either federal or state laws, and thus have been available for creditors to grab.” The case is In re Nessa, a federal bankruptcy case out of Minnesota. Forbes: “Will your tax rate be lower in retirement? Do you plan to spend all your savings? Think twice about a conversion. In recent months, you’ve probably heard a lot about the benefits of converting traditional pre-tax individual retirement accounts into Roth IRAs. But here’s something you may not have heard: Many taxpayers should run, not walk, from a Roth conversion.” Forbes: “If you miss the 60-day rollover deadline, will the IRS be sympathetic? You can move wealth from a company pension plan, a 401(k) or traditional Individual Retirement Account into a traditional IRA without owing any taxes in what’s known as a ‘rollover.’ . . . a surprising number of taxpayers make mistakes when doing a simple rollover and end up either paying taxes prematurely or paying an expert like me to help them clear up the mess.” This article was written by Robert S. Keebler, CPA, MST, AEP (Distinguished) is a partner with Baker Tilly Virchow Krause, LLP and chair of the Baker Tilly Financial and Estate Planning Group. He is the author of The Rebirth of Roth, A CPA’s Ultimate Guide for Client Care. Mr. Keebler was named by CPA Magazine as one of the Top 100 Most Influential Practitioners in the United States and one of the Top 40 Tax Advisors to Know During a Recession. I known that Mr. Keebler is one of the leading experts in the area of IRA law because of his close relationship with WealthCounsel, a fabulous company that produces the best estate planning software that a lot of money can buy. I have been a member of WealthCounsel and have used its software since September of 2005. If you are an estate planning lawyer who does more than a few estate plans a year, you owe it to yourself and your clients to purchase the WealthCounsel software. Call me if you would like to get my two cents on why I love the company and the software. If you have any questions about forming or operating an IRA LLC, call me, Arizona IRA LLC attorney Richard Keyt. I do not charge for questions about forming IRA LLCs. I do charge a fee, however, for giving an opinion on whether a specific proposed transaction would be a prohibited transaction. If you have questions about the timing or mechanics or any other aspect about forming an Arizona IRA LLC, call me at 602-906-4953, extension 1.Remember, the first step in actually forming an IRA LLC is to find a custodian that will allow the self directed IRA investment. I do not recommend self-directed custodians, but my Custodian topic area lists IRA custodians that have been a member of IRA LLCs that I have formed. About: See Sunwest Trust’s about web page. Phone: (800) 642-7167 Fax: (505) 275-1554 Fax: (480) 306-8408 Website: www.sunwesttrust.com Email: tlw@sunwesttrust.com Mailing Address: Sunwest Trust, Inc. Home Office: Sunwest Trust, Inc. Caveat: Neither KEYTLaw, LLC, nor Richard Keyt recommends the above company to act as a custodian of any IRA account. The above company is listed on this IRA LLC Law website because Richard Keyt has formed at least one IRA LLC in which a member has been the above company as the custodian of an IRA. Forbes: “Come Jan. 1 anyone can convert a traditional IRA into a Roth IRA. Not everyone should. Here’s help deciding if the strategy fits you. Next year all taxpayers will be allowed to convert their traditional individual retirement accounts into Roth IRAs, . . . Conversions are complicated and make sense only for certain taxpayers. Even those who might reap big benefits from converting have to overcome a natural aversion to paying taxes sooner than needed.” Forbes: “Common pitfalls include high costs, poor performance. Investors in independent retirement accounts are paying considerably more in fees on average than are those enrolled in company-sponsored 401(k) plans.” Newsweek: “People with significant assets in their individual retirement accounts can tap that cash to invest in a retirement home, but there are many complexities involved. They have to establish a self-directed IRA with an independent trust company such as Pensco Trust and the Entrust Group.” About: See Self Directed IRA Services, Inc.’s company profile web page. Open an Account: See Self Directed IRA Services, Inc.’s Get Started webpage. Website: www.sdiraservices.com Email: info@sdiraservices.com Mailing and Street Address: 600 Congress Avenue, Suite 400 Caveat: Neither KEYTLaw, LLC, nor Richard Keyt recommends the above company to act as a custodian of any IRA account. The Street: “Some Americans are using their Individual Retirement Accounts to invest in cattle, sports teams and restaurants, betting they can make more money than in the stock and bond markets. . . . Popular options include real estate investments and small-business loans.” San Francisco Chronicle: “With many properties at bargain-basement prices, more people have been turning to their self-directed IRAs as a ready source of capital to make real estate investments. Companies that manage self-directed IRAs say real estate investments by their clients are up as much as 30 percent over the past year. . . . Self-directed IRAs account for just 2 percent of the $4.2 trillion IRA market, but are among its fastest- growing segments. They allow access to a variety of investment vehicles beyond just stocks and bonds. The IRS closely regulates them, and any real estate investments must be handled by IRA custodian firms that hold the property inside the IRA.” Forbes: “Church bonds. Mexican land. Pay telephones. Swiss annuities. Bus shelters. Gold coins. Paintings. Mortgages. Untraded stock. Bull sperm. Bet you don’t know which five of these ten assets are permissible investments in Individual Retirement Accounts. . . . If you’re interested in unconventional assets, it’s worth boning up on the rules, because most lawyers and IRA custodians have only partial knowledge.” See the table of custodians that allows self directed IRA investments. CNBC: “If you recently watched your individual retirement account or 401(k) drop by double digits, you may wonder if there is a better way to sock away money in an uncertain economy. What if you could replace some of your investments with tax-deferred holdings not tied to the troubles on Wall Street? Maybe you’d prefer to invest in cattle in Wyoming, a gas station in Philadelphia or an underwater cemetery in Miami.” All IRA owners who have made self-directed investments into an IRA LLC and anybody considering do so should read Jeff Nabers’ article called “What is the Plan Asset Rule?“ This rule turns assets owned by an entity into assets that are deemed to be assets of the IRA with the consequence that any transaction between a disqualified person and the entity is a prohibited transaction.
See my post called “Department of Labor Regulation 29 CFR 2510.3-101 – the Plan Asset Rules.” |
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