All Forum Posts by: Jaime Raskulinecz

Think about it and weigh the options before going the Solo k route. You may be able to open a SEP IRA instead and save on administration costs on the Solo k. Depends on your objectives and if you will actually maximize the contributions.

Jaime

@Drew Castleberry There are also other ways to minimize fees without going the LLC route if that is your sole reason for doing this.

@Drew Castleberry While IRA LLCs are technically OK, we tell clients to use caution using them unless they have an advisor who will answer questions for them and review transactions and other things related to the operation of the LLC and making investment.

Did you know something as simple as the LLC applying for a credit card or another type of credit account, and the owner of the IRA signing the application is a prohibited transaction? We have seen all kinds of mistakes made within these LLCs just because no one is helping walk you through the specifics.

We have some resources on our web site that can help if you want to check them out.

Jason: Your father is considered a disqualified person and it would be a prohibited transaction for his IRA to lend you funds.

You can learn more at our web site or you may contact my office staff for more information.

Jaime Raskulinecz

It is a great idea to consult with your CPA or tax advisor. However, I can answer a couple of these questions for you @Mark Carson.

The funds will have to come directly from the Borrower into your IRA account with the current custodian. This is essential.

You should ensure that you fully document the reason for your decision to have your IRA write off part of the loan and accept a lesser amount as payment in full.

Typically, your custodian will accept your instructions to "sell" the note (accept a reduced payment in full and take the loan off the books). You will now have cash in your IRA account instead of a loan for whatever face amount the original loan was.

If you keep the cash in your existing IRA account, when the custodian does Fair Market Value reporting to the IRS your account value will be reported at the reduced amount. If you transfer the cash to a different custodian, the new custodian will report the Fair Market Value of the account.

Because this investment was held in a tax advantaged account you don't report and deduct any losses.

Please let me know if I can answer any other questions.

Jaime

@Mike Hurney good to see you here. How are you?

Jaime

While we have many clients using a Solo k or single member LLC so they have checkbook control, I will always caution that the IRA owner must be intimately familiar with the IRS regulations on prohibited transactions and disqualified people at the very least. We have seen people make mistakes by doing something as seemingly unimportant as personally signing a credit card app for the LLC. If it is a single member LLC with the IRA as the sole member this constitutes a prohibited transaction.

There is nothing that can't be done directly through the IRA to avoid doing something that will have you lose the tax deferred status of your account. The penalties are just not worth it.

Investing into private equity, regardless of the industry, is typically a very straightforward investment. As long as the custodian has all the documents required it should be able to get done in the standard processing time.

@Mark Freemanundefined it doesn't matter if directly through the IRA or in an entity. The same rules apply if the IRA is a member of the LLC.

Please feel free to call my office and speak to any staff member who would be happy to help and answer any questions you have. Just let them know you spoke with me here.

Jaime

973-533-1880

Hi Mark. No matter how you structure this with a self-directed IRA it is a prohibited transaction. There can be no transactions between disqualified persons. This includes ancestors and descendants and their spouses, the IRA owner and their spouse as well as any businesses these people own or control.

Sorry for the bad news. However, now that you know about self-directed IRAs you should continue to learn about them as they are a great tool to boost retirement savings.

Let me know if I can be of any further assistance.

Jaime

@GregWright there are many other issues and complications with ROBS as well. My recommendation to anyone considering this is to go directly to an ERISA attorney who can set this up and continue to advise you so that you stay within IRS guidelines for this strategy. This is quite a bit more expensive than what you state above.

The other responders are also correct that when looking at using a self directed IRA as a strategy to build wealth for retirement, you don't look at it as a way to make current income as this would be prohibited.

Many of our clients, however, have considered holding real estate as a still profitable venture in their SD IRA even with UBIT. Many consider the returns in general to be so superior to traditional investments that even with UBIT factored in the growth is still there.

Jaime