Mastermind Group CPA Interviews

4 Replies

Hi BP. I am beginning interviewing CPAs next week. I curently use my Self-directed IRA to purchase RE, but I am planning to transition some of my REI purchases under my LLC. What are some of the questions that I should consider asking candidates for the CPA position on my professional wealth building team during these interviews? Thanks. Stanley E.

Here are a couple of questions I would consider asking:

1. When investing through a self directed IRA does it matter what type of IRA it is e.g. standard IRA, Roth IRA, SEP IRA (self employed pension).

2. How is debt treated in an IRA investment

3. How do I stay clear of issues that threaten to disqualifying my IRA as a tax deferred investment vehicle.

4. How must the IRA investment be listed on the ownership entity/docs.

5. Can the IRA be a stockholder in a private corporation or a member of an Llc

6. Is there an affordable service that can be utilized to keep the IRA in regulatory compliance

@Stanley E.

Are you looking to invest your self-directed IRA in an LLC whereby the sole member is the IRA?

Stanley,

It is prohibited to move your IRA RE investments into your personal LLC.  Many people will have their IRA form a Check book IRA LLC and then purchase real estate.  You are correct to look for professional help but not only from a CPA but also an attorney preferably tax attorney familiar with IRA’s etc.

Your custodian/administrator should be able to give you a list of proposed CPAs/Attorneys that other clients use.  Cold calling CPAs about IRAs in most cases will take you a lot of time before you find a good one.

If you are going to ask questions you need to know the answers so you can make a good decision.

Ask the following questions:

1.     What are the primary publications discussing IRAs –Answer: publications 590 and 560.

2.     How many IRA Taxpayer Identification Numbers (TINs) do you get a month from the IRS? Answer:  Should be at least a couple.  When should my IRA get a TIN? Answer; if IRA incurs debt, has Unrelated business income (UBI), receives a K-1,is required to issue 1099s, etc

Answers to Chris T questions:

1. When investing through a self directed IRA does it matter what type of IRA it is e.g. standard IRA, Roth IRA, SEP IRA (self employed pension). Answer: All can be self directed.

2. How is debt treated in an IRA investment. Answer: Unrelated Business Income tax(UBTI) specifically Unrelated Debt Financed Income(UDFI) will have to be calculated on the percentage of debt to purchase ratio.  It is reported on IRS Form 990T.  Then ask him how many 990T forms he generates a year—I would hope, at minimum, he does half a dozen.

3. How do I stay clear of issues that threaten to disqualify my IRA as a tax deferred investment vehicle.  Answer: He/She should say “ask me for advice” or at least tell you to read IRS code section 4975.  Most attorneys especially if they set up the checkbook LLC, like Mark Nolan is asking, should review your ongoing purchases for free or a nominal fee. Be careful with these LLCs as the IRS has made it mandatory that the custodian/administrator report these entities to the IRS as of 2015.

4. How must the IRA investment be listed on the ownership entity/docs. Answer: There are several vesting options-ABC Administrator FBO Stanley IRA #12345, or ABC Custodian FBO Stanley IRA, or ABC Administrator FBO IRA #12345, or etc.

5. Can the IRA be a stockholder in a private corporation or a member of an Llc- Answer: It depends No if it is a “S” corp, Yes if it is a “C” corp but there is also ownership percentages and control issues that must be considered.  If they know about the Swanson vs IRS, Rollins vs. IRS and the “Adler” decision then they should be up on the issues involved.

6. Is there an affordable service that can be utilized to keep the IRA in regulatory compliance. Answer: Look for a tax attorney and have him/her part of your team as well as looking into administrators/custodians that provide education on the subject.  Self directed IRAs have not been litigated much so there is not a lot of precedence which makes for more gray area.

Good luck in building your team with best professionals and I hope this helps you find them.

 

Thanks everyone. This is all great advice for my meeting on tomorrow. When I stated "transition", I actually meant that I would begin buying RE through my LLC separately from my self directed IRA. So I guess I need advice on what questions to ask the CPA that would help me to better plan my REIs trough my LLC. Thanks again. Stanley

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