All Forum Posts by: Alan Johnson

@Jonathan Choyce  Congress is considering changes to the regulations that could impact how you can invest your SDIRA.  So it's probably a good idea to wait a month or two until the Build Back Better legislation is passed before investing your SDIRA into a private deal.

@Jay Kaltenbach In my opinion, the best investments to make with self-directed IRAs are those that are least likely to result in a prohibited transaction. This may seem like a flippant remark, but get a copy of Mat Sorensen's "The Self-Directed IRA Handbook" from Amazon and read through the case law summaries he includes in the book. Pretty scary stuff if you don't follow the rules.

Trying to decide between investments that offer returns that differ by 3 or 4 percent per year doesn't matter much if you lose the cumulative tax advantages because your IRA has been disqualified.

@Jay Kaltenbach To me, a minimum of 15% annual return is a high hurdle rate for some of the alternatives you mentioned. I know of some individuals that have invested their IRAs passively in RE syndications with the expectation of receiving annual returns similar to this. But these are almost always leveraged offerings which, as pointed out by others, subjects the IRA to UDFI.

UDFI is sometimes characterized by custodians as "the problem you want to have."  Basically, the reasoning behind what they are saying is that, for example, an investment that returns 8% without leverage (borrowing) might return 15% with leverage.  Paying UDFI on the leveraged portion of the investment might reduce the return from 15% to 12%.

While not as good as 15%, a net after tax return of 12% is still better than 8%.

Please realize that these percentages are purely made up to illustrate a concept, not the magnitude of the return differences. 

@Angel Gonzalez and @Herb Dorn  I agree with @Bill Exeter's note of caution. Just do this Google search: reconciliation self directed IRA

You'll get a smattering of links (ignore the Ad results) that explain why this is such a hot topic right now (and why you should get involved by communicating with your representatives).

Most expect that the issue will be resolved once the Build Back Better legislation has been passed in the coming weeks.... After that it may be too late to get involved.

@Jonathan Choyce The IRS has published a rollover chart that consists of a matrix that allows you to see if the account type you want to move from is eligible for the account type you want to move to.  You can get the chart via this link.

@Evan Loader  My assessment is that this will cause a lot of needless time, expense, and pain for no discernible benefit whatever.

See "Prohibition of IRA Investments: Don't Cause Injuries by Fixing What's Not Broken" on Medium.com

@Christopher Bannister  Happy to help where I can.  I work during the week in Wilmington, so we could even meet some weekday when you're not on the road.  Just be sure to bring masks, vaccination records, sanitizer, a yardstick, ........ BTW, my preferred sanitizer is scotch.

@Christopher Bannister what intrigues me about your question is that you mention a Simple IRA (note capitalization). By 'simple' did you mean a 'regular' IRA, or did you mean a Simple IRA established for a small business? If the latter, and if the business is owned by you only, there may be advantages to rolling it over to a solo 401(k). See the IRS rollover chart for a breakdown of the alternatives open to you.

Also, buy and hold investments are common in self-directed IRA accounts, but flipping much less so. The reason is that too many flips in a year might look like your IRA is conducting business rather than making an investment. This could subject it to Unrelated Business Income Tax (UBIT).

Finally, I see that you live in Wilmington, DE.  You're less than an hour's drive to @Carl Fischer at CamaPlan.  If he's agreeable, I suggest you see if he can find some time to meet with you.

@Account Closed Oops, sorry. Just re-read your post and see that your LLC holds rental properties. So you wouldn't be re-registering with an investment sponsor. Instead, you would be changing the real estate title from being owned by your LLC to being owned by your custodian FBO your IRA.

@Account Closed Yes, you really will be just fine. In the worst case you would "only" have to re-register the investments held in the LLC into the name of the custodian fbo your IRA. While straightforward, this will be a pain for you, the custodian, and the investment sponsor.