Self Directed IRA Question - Or Lawyer Referral?

Question

Hey guys, random question!

In a Self Directed IRA, can you list your own property for sale if you have your license?

Stipulation being:

1. You receive 0% commission and or any compensation on the sale.

I know SDIRAs/self dealing is pretty clear - this area seems a little gray to me. Also if anyone knows a good SDIRA lawyer I can hire/ask that would be just as good.

Thanks so much!

Dmitriy Fomichenko · Answer

@Dan Gheesling

Here is what IRS says about prohibited transactions (I quote):

"Prohibited transactions generally include the following transactions:

Any of the following acts between the plan and a disqualified person:

• Selling, exchanging, or leasing property
• Lending money or extending credit
• Furnishing goods, services or facilities"

Here is a link to the IRS code for your reference:

https://www.irs.gov/retirement-plans/plan-particip...

Here is my take on this: using your license to list a property owned by your IRA for sale is clearly providing a service to your IRA (regardless if you are paid for this or not) and is a prohibited transaction. Don't do that!

The alternative to that is to simply not have an agent represent your IRA. You don't have to have an agent and can sell the property as the owner (or in this case the IRA can sell the property as the owner). You don't want to use the MLS that you have access to as license real estate salesperson, but instead get one of those services that allow you to list your property on the MLS for a flat fee.

George Blower · Answer

@Dan Gheesling

In the context of an IRA (not a solo 401k plan), the most conservative approach is not to broker your own transaction; however, the fact that you are not personally benefiting (receiving a commission) but rather looking after an asset of the IRA, this is a good argument that such transaction is not considered a prohibited transaction. What is more, provided you are not consistently brokering these transactions, the argument is that such transaction is not considered sweat equity.

Dan Gheesling · Answer

Thanks George! I appreciate your insight.

Leonard L. · Answer

I set up my self-directed vehicle through IRA Financial Group out of Florida, and they have lawyers that answer questions like this for me.  From what I understand, any sweat equity can be a problem, because you are using your own expertise and work to benefit the retirement fund.  That is why you are never supposed to self-manage the self-directed assets (even when not taking a fee).  But maybe I have received overly conservative advice, so YMMV.  Just sharing what I have heard, I am not an expert on these things.

Self Directed IRA Question - Or Lawyer Referral?

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