Funding thru my IRA via Sub chapter S corp - Posted by Mike Romanoski

Real Estate Investing Real Estate Law
#1

Posted by Nate on March 19, 2001 at 23:00:48:

Ed,

I am not a tax attorney, nor an accountant, so my guesses are as informed as yours. What you’ve said sounds right.

I guess by “partner” with your IRA, you mean that your IRA can invest in something, and you can also invest in the same thing (say, an LLC, or a limited partnership…as long as it is not controlled by you or an entity you control).

I personally think the more powerful use of the IRA is that just because you can’t engage in self-dealing with “prohibited persons”, that is not really much of a limitation. Prohibited persons is a fairly narrow definition – you, your spouse, direct ancestors (i.e. parents, grandparents), descendents, and spouses of same.

It does NOT include siblings, aunts, uncles, business partners, best friends, etc. etc. etc. It would be pretty simple to set up an arrangement whereby your IRA invests in their deals and their IRA invests in your deals. Clean, easy, and perfectly legal. Best part is, you both win.

NT

#2

Funding thru my IRA via Sub chapter S corp - Posted by Mike Romanoski

Posted by Mike Romanoski on March 18, 2001 at 11:57:35:

Hi!

Here’s my idea. I need comments on whether this is legal, feasible, desireable, tax implications etc. I would like to fund my deals by 1. Establishing a Sub chapter S corporation. 2. Have my IRA purchase shares of the corporation. 3. Have the corporation use the proceeds to buy the real estate. Then, the legal entity owning the real estate is the corporation and profits go directly into my IRA and are tax-deferred. Sounds pretty sweet to me. Comments?

#3

Re: Funding thru my IRA via Sub chapter S corp - Posted by Ed Garcia

Posted by Ed Garcia on March 19, 2001 at 10:35:40:

Mike,

Any time you get a wild hair like you’ve just done. I suggest that you run the idea by the service company who services you’re IRA. They will not only tell you how it operates, but are usually up to date on any changes that may take place from the time you originated it.

What Nate has told you below is true, however it is to my understanding on a Roth IRA, you can partner up with your IRA, as long as the IRA doesn’t encounter any debt. Interesting enough, you can partner up, but not borrow from your IRA.

Where I agree with Nate is that IRA transactions have to be arms length. In two weeks I’ll be in Atlanta at the convention, while there, I’ll check with Hugh Broma for the answer. Meanwhile check with who services your IRA, or your attorney before carrying out your idea.

Ed Garcia

#4

Re: Funding thru my IRA via Sub chapter S corp - Posted by Nate

Posted by Nate on March 18, 2001 at 12:06:53:

Nope. Not allowed. Your IRA cannot have any dealings with you or an entity controlled by you.

NT