Self directed IRA

[Ben Cochran]

So I've got a old 401k with T Rowe Price that I want to roll into a SDIRA. They just informed me that they don't do SDIRA's that allow for real estate investing.

So now I'm looking for someone that will allow this.

My question is; Since I am looking to invest locally in Northern Colorado (Fort Collins area) do I need a custodian that is also local?

If so, do any of my fellow local investors recommend anyone?

If the custodian doesn't need to be local, who do you guys n gals recommend?

And a follow up question; It is a small 401k (around 20K), after rolling over to a SDIRA, can I still contribute to it?

Thanks in advance everyone..merry Xmas!

[Duncan Taylor]

Originally posted by @Matt Devincenzo:

@Robert Leonard it is not prohibited. The prohibited transaction would be buying, selling, lending ect between disqualified parties. By forming a partnership and keeping all percentages the same from start to finish no transaction has taken place between the disqualified persons they are each supporting their own share of the investment.
From the IRS Publication 590:
Generally, a prohibited transaction is any improper use of an IRA account or annuity by the IRA owner, his or her beneficiary or any disqualified person......

The following are examples of prohibited transactions with a traditional IRA.

• Borrowing money from it
• Selling property to it
• Receiving unreasonable compensation for managing it
• Using it as security for a loan
• Buying property for personal use (present or future) with IRA funds

But, remember, you must keep the percentages EXACTLY the same throughout the entire series of transactions.

For example, if the property is a rental and incurs a major expense that exceeds the current reserves, each party must add additional funds, in their exact percentage. You can't say, well, since Uncle Bob's share is not held in an IRA we will let him pay all of the expense and then he can deduct it. The same is true for profits from the series of transactions. If your SDIRA is a 10% holder, it can't take more than that %age of profits, not matter what your LLC management agreement says.

The overall benefits of doing this are small and the potential pitfalls are huge. The ultimate irony is some of the taxes you are deferring are at the long term capital gains tax. You will get the privilege of paying your marginal tax rate on those funds in the future.

Good luck, keep good records, use a professional to do your tax returns.

The sad thing is even 10 years AFTER you complete the series of transactions and stop doing this you are still in the look-back window if they get interested in your returns for some other reason.

Honestly, there are far easier ways to get started.