I own 8 properties in a self directed IRA. I am interested in selling one or more, but I want to carry the paper for a continued income stream.
My questions are as follows:
How would the transaction be handled from a paper work prospective? On one particular property I have $90k invested and it would sell for $240k.
Would the IRS consider this a distribution of the net sales prices say $225k , even though I may only get $10k down? or
Would this be considered an installment sale like I have done outside my IRA?
My custodian in Equity Trust.
If you have done something similar please let me know. Thanks!
The IRA is selling the property. The IRA is receiving a small gain in the form of the down payment. That gain would go to the IRA and would generally remain tax-sheltered. It would only be taxable to you if you then chose to have ETC issue a distribution from the IRA to you. Otherwise, the IRA is trading the real property asset for a note asset and there are no tax implications.
If you are holding 8 properties in an ETC account, you need to seriously consider a checkbook plan such as an IRA LLC or a Solo 401(k). It will save you tremendously on paperwork and fees.
I’m interested in purchasing with the owner finance option.
@John R ables , the info @Brian Eastman gave above is accurate.
I would recommend simplifying the process like this:
1. Form an IRA-owned LLC. You'll have to contact a third-party to do this.
2. Transfer the properties from your IRA to the IRA-owned LLC.
How? You'll save on all the custodian fees, but the trade-off is that you would be managing everything yourself, or with the help of a handy dandy attorney.
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