Getting Around IRA Self-Dealing: Is This Legal?? - Posted by Monique

Real Estate Investing Real Estate Financing
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Posted by Paul NM on February 11, 2001 at 12:41:30:

Hi Monique,

If it looks like a duck and it quacks like a duck…

Why not just have your IRA become a hard money lender for one of your friend Jack’s deals. If you did that maybe some other investor’s IRA would be willing to loan your Corp. some money :slight_smile:

PaulNM

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Getting Around IRA Self-Dealing: Is This Legal?? - Posted by Monique

Posted by Monique on February 11, 2001 at 09:35:48:

I know we can buy properties SubjectTo in your IRA. Clearly, all profits from the property remain in the IRA. (Let’s ignore the unrelated business income tax for the moment.)

Is there a way to use IRA funds for the purchase, but realize the profits outside the IRA?
Perhaps, by working with a trusted investor as an intermediary buyer/seller to get around the IRA self-dealing issue. And, the most important question of all … can this be done completely legally?

I’m thinking off the cuff here, but consider this series of transactions:

  • We find a Subject To deal that requires $10K to make up back payments
  • We have the $10K in an IRA
  • We have our trusted investor buddy, Jack, buy the property SubjTo the 1st mortgage. Jack gets a $10K 2nd mortgage from our IRA.
  • Jack then sells the property SubjTo both the 1st and 2nd mortgages to a Corporation that we own
  • The Corporation now owns the property and can L/O it to a T/B. The profits from the L/O go to the Corporation and are available for use.

Anyone ever work a deal like this? Can this be done legally?

Monique

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Getting Around IRA Self-Dealing: Is This Legal?? - Posted by David Alexander

Posted by David Alexander on February 11, 2001 at 13:21:50:

That is pretty blatant self dealing.

Or another possibility… although I’ve never walked this line… I believe you can partner with your IRA… and the distribution of the profits from the deal dont have to be even. In other words, Your IRA puts up 10k for a return of say 12k in x months, and your corp puts up the deal and works the deal and get s the rest. I think that is doable, check with your advisors.

Paul also gave you a good answer as a way to handle it.

David Alexander