All Forum Posts by: Ravi Veer

I believe any form of quid-pro-quo would be prohibited.

Kaaren Hall, Thank you for the pointer to RITA. They have a nice article on "prohibited transaction" for self-directed investors: http://www.ritaus.org/assets/documents/RITA.Prohibited.Transactionsforinvestors.final.12.15.10.pdf

Steven Hamilton II, I am not following the "Joint venture" route you are suggesting. Can you elaborate on how that could solve the "prohibited transaction", "excess contribution", and UBIT hurdles?

Thank you Kaaren Hall. That is a clear-cut set of activities. This is the first time I am hearing that "choose the property, screen tenants, collect the rent checks and hire third-party vendors" are considered "arms-length" activities. Are there any Government communication (say from DoL or IRS) or court rulings which substantiate that those activities are on the safe side of the line?

Aravindan

Jon,
Thank you for the helpful answers. I was thinking of going the route espoused by J Scott: Even if I hired a GC, I would have to repeat a vast majority of GC's work myself anyway. So, cut out the GC and hire other specialty contractors directly (plumber, electrician, roofer, etc) to do all the work.

Should I be asking the following question to infer if my involvement would be a contribution?: *If it were not my IRA's property*, would I be compensated for my supervisory work?

Perhaps I should hire a GC mostly for the title and to pull permits?

I am not planning to do fix and flip. Rather I was planning to fix and rent it out before selling, eventually.

From your answer, it also looks like I cannot manage the rentals of properties owned by IRA. I should look into getting an external property manager for a minimal fee even though I do most of the work.

Being beneficiaries of IRA, we cannot possibly 100% contract things out. At the least, we have to hire, fire, write-checks, and sign-contracts regarding 3rd party contractors and property managers. Is that too much involvement that could be categorized as "contribution"?

One of the regulation that seems to be a big hurdle is the "conflict of interest".

Hi,
I am planning to start an LLC to purchase a real estate. My friend's IRA (IRA-A), my IRA (IRA-B), my friend (A), and me (B) are planning to invest. I have been reading up on IRA-LLCs and have a couple of questions.

The residential property will require a total gut job for which I plan to be the General Contractor.

1. Can any services be provided by disqualified person (A or B) to the LLC? Or, will 4975(c)(1)(c) construe it as "prohibited transaction"? Also, will it be considered as transferring value from the IRA beneficiary (A or B) to the plan (IRA-A or IRA-B) triggering "excess contribution" (per Tax Court Memo 2012-168, or Commissioner Email CCA_2009112409523350)?

2. Can the IRA plan beneficiary (a Disqualified Person) even make decisions on where to invest? Isn't that considered "furnishing of goods, services, or facilities between a plan and a disqualified person" per 4975(c)(1)(c), hence a prohibited transaction?

Ravi