Posted by Laure on November 08, 1998 at 20:48:34:
IRA MONEY - Posted by Laure
Posted by Laure on November 08, 1998 at 10:32:58:
Has anyone any experience using their self-directed IRA to invest in their real estate? was wondering… could I create a corporation ie. Contractor. DO the repairs through the corp. Have the IRA pay the expenses for the improvement to the Corp. and take a salary from the Corp.??? The tax advantages could be incredible since profits to an IRA are tax free, and I could still get “paid” for my work, even though I would pay SS tax and Income tax on my salary. The appreciation upon a sale would pass through the IRA without legal fees, escrow fees, and all the hassle of a 1031 exchange.
self-dealing & prohibited transactions - Posted by William L. Exeter
Posted by William L. Exeter on November 10, 1998 at 14:42:04:
The corporation in your example would be considered self dealing with your IRA and therefore would be classified as a prohibited transaction. You can not personally collect any fees or commissions or receive any financial benefit from any transaction that your IRA is involved with - otherwise you will have a self dealing situation. Feel free to email with additional questions.
Security Trust Company
Re: IRA MONEY - Posted by R. Porter(ohio)
Posted by R. Porter(ohio) on November 08, 1998 at 11:16:50:
Self-directed IRA money can be invested in real estate(usually mortgages) but you can’t use your own IRA money to invest in any property where you have an ownership interest. That would also include any corporation that you control. Check with your accountant on all the specific rules.
We are getting IRA money to buy houses, but the funds are coming from third parties, usually from people we know in the area. They set up a self-directed IRA account, and we borrow the money from the IRA.
Re: IRA MONEY - Posted by Laure
Posted by Laure on November 08, 1998 at 11:56:17:
I don’t want an ownership interest in the property. I want it owned wholly by the IRA. I just want to own the corporation that does the repairs, etc. to the real estate. The Construction company that is hired to remodel etc. the property owned by the IRA. Charge going rate for expenses, not gouge. Then take a salary from the Construction Corp.
Re: IRA MONEY - Posted by Bud Branstetter
Posted by Bud Branstetter on November 08, 1998 at 17:40:13:
There is no question about the ability to do rehab work on a property owned by the IRA. With the Roth now that profit becomes non-taxable. As long as that contractor is at arms lenght you should not have a problem.
What is going to be the problem is the construction business that you personally want to make money from. The IRA is intended for investments not running a business. You can invest in a business that you have no control of and work for that business. What I hear you want to do is buy houses and make money personally off that work. You can eventually find someone that says they can do it but will the IRS agree with that approach several years later.
I have had few problems rehabing property in the IRA since '91. I also have contacts in Dallas with ERISA attorneys if you want to pay their price for the interpretation. I might also suggest contacting Mid-Ohio Securities and asking for a reference to their attorneys.
Re: IRA MONEY - Posted by JPiper
Posted by JPiper on November 08, 1998 at 16:15:33:
My belief is that you can do what you’re proposing.
But rather than accept my belief, my suggestion to you would be to email or call Hugh Bromma, with Entrust. If you go to the top of this page you can click on a banner with their name. The phone number and email address are there. I believe they are also listed in the creative connections section.
I find Hugh Bromma to be very knowledgable, and I think he will be able to answer your question in detail. Hugh may know some information that your accountant wouldn’t know. Give him a call.