Selling my investment home to LLC which is owned by my IRA

[Naresh Hanchate]

Hello Tax experts,

I am california resident and I own one investment property in southern california which is cash positive with good equity. To be precise, i had purchased this property for $405K in 2014 and now market value could be around $550K. I do get good rent which makes me cash positive $300 every month.I have $280K mortgage on this property with 4.125% interest of 26 years remaining.

My wife and I, have about $280K in our IRA and i am thinking to invest this money to purchase property via LLC. So one thought came to my mind was, Can i sell my investment property to my IRA LLC for $280K ? Will it be legal transaction because I am selling it for less than current market value? What is the risk?

Doing this, all profit from rental income will grow in IRA where I will have to pay taxes upon withdrawal after retirement. I don't have to worry about showing profit and loss, each year during my personal tax filling. is this correct assumption?

Is it legit to sell property below market value? Is it legit to sell property to your own IRA - LLC ?

Thank you for advise.

[George Blower]

@Naresh Hanchate

Such transaction would result in a prohibited transaction.

Certain transactions between an IRA and its owner or an IRA and a "disqualified person" are specifically prohibited by law.

A prohibited transaction is a transaction between an IRA and a disqualified person that is prohibited by law.

The transaction that you are describing would run afoul with some or all of the following prohibited transaction rules:

Prohibited transactions generally include the following transactions:

• a transfer of IRA income or assets to, or use of them by or for the benefit of, a disqualified person;
• any act of a fiduciary by which IRA income or assets are used for his or her own interest;
• the receipt of consideration by a fiduciary for his or her own account from any party dealing with the IRA in a transaction that involves plan income or assets;
• the sale, exchange, or lease of property between an IRA and a disqualified person;
• lending money or extending credit between an IRA and a disqualified person; and
• furnishing goods, services, or facilities between an IRA and a disqualified person.

https://www.irs.gov/irm/part4/irm_04-072-011

https://www.irs.gov/retirement-plans/retirement-pl...