Using Self Directed IRA's to purchase FlIps

[Ray Mungia]

Has anyone used a self directed IRA to purchase real estate? If you buy a property, renovate it and flip it, do you still pay taxes on the profit if you put all of it back into the IRA, including the amount you pulled out?

[Dmitriy Fomichenko]

@Ray Mungia

Yes, you can purchase real estate in a self-directed IRA. Note that as a "disqualified person" you are not allowed to provide any services to the IRA or benefit from it in any way. So when you are talking about flip all of the work must be outsourced, you personally can't participate. Moreover, flipping most likely will be considered an active business and when you run an active business inside of a tax-deferred retirement plan all of the gains, incomes and profits from such activity will be subject to Unrelated Business Income Tax (or UBIT) so be sure to consult with a qualified tax professional on tax implications. All income from passive investments will be sheltered from taxes inside of a SDIRA.