Hello! My current pension plan is being closed and I would like to roll the capital into a self-directed IRA. At first, I planned on investing in stocks. However, I have a "side" business in which I buy and sell vacant land and it was difficult for me not to take out the money and deal with the tax consequences. So I came upon the idea that I could buy and sell real estate within the IRA. I would not be doing this through my business, I would be doing it through the IRA as myself or my husband. They are typically low-cost investments, so I'm not worried about the IRA running out of capital for the costs associated with the land. That being said, I know it is an untraditional route and I could run into problems if the IRS thinks I'm benefiting myself or my husband. Would it be a problem if I had my business advertising for the land sale, even if it goes through the IRA? Thank you so much for your expertise and opinions!
Great idea to move your funds over to a self-directed IRA. This seams like a great option for you, given your experience in these investments and it also saves you from having to deal with any tax consequences from a distribution.
Unfortunately using your business to advertise the land owned by your IRA would be considered a prohibited transaction. Your business can not provide your IRA with any advantage where it would normally pay someone. The IRA can not pay your business for the service either.
Your strategy has several issues, notably a risk of self-dealing or your being perceived as providing a benefit to your IRA, which can be catastrophic to the IRA. Also, flipping transactions if executed regularly are considered a trade or business and subject an IRA to tax on Unrelated Business Taxable Income.
The purpose of a self-directed IRA is diversification. Investments must be entirely at arm's length and should be passive in terms of the income they produce. Passive income is interest, dividends, royalties, rent from real property, or the future sale of an asset held to produce such passive income.
There are likely other ways you can find to place this capital into the real estate asset class that you know and understand, but the approach you outline is not likely going to be a good fit for an IRA.
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