All Forum Posts by: Kaaren Hall

Ravi - I want to mention that UBIT tax (from running a business in your IRA) is not cut & dried. Some have been made to pay the tax who only flipped one property! The IRS will take a look at this and ask if you are "running a business" in your IRA. I've heard the recommendation to avoid this active business activity altogether and instead lend your IRA to others (passive) and let them fix & flip. You can read about UBIT at www.IRS.gov Pub 598.

Regarding the arms-length activities, it may be in IRC 4975. I am a member of the Retirement Industry Trust Association and these activities are commonly know to be acceptable. IRC 4975 covers prohibited transactions.

Keeping things arms-length is the rule with self-directed IRAs. No self-dealing, no contribution of sweat-equity, no present benefit. What you can do is choose the property, screen tenants, collect the rent checks and hire third-party vendors.

I have to thank Josh & his crew for creating such a great resource for investors. Here at uDirect IRA Services we've opened many accounts for Bigger Pockets members. We're always open to addressing any self-directed IRA questions that come up so please ask us!

To answer Christopher Keivit's question, Tax lien investing is best done with a "checkbook IRA". You will likely be buying lots of assets and receiving lots of checks so the IRA-Owned LLC (Checkbook IRA) is the ideal vehice for this. Additionally there are some counties like Maricopa County that will only sell liens with a credit card (debit card).