Bud, - Posted by Carol
Posted by Carol on October 29, 2000 at 10:35:37:
I did not borrow anything, nor did “I” have any income from this transaction. Everything was done by “Mid OH Sec FBO Carol Kostic Roth IRA”.
Ergo, no tax.
Take care…
Carol
References - Posted by Bud Branstetter
Posted by Bud Branstetter on October 29, 2000 at 19:24:10:
Carol,
Not to belabor the subject but my concern was that your response appeared to say that you felt there was no tax due and was unconcerned with the issue. I ran a search and came up with http://www.fool.com/taxes/2000/taxes000908.htm This broaches the subject. The next reference is http://www.ici.org/retirement/retirement_ira_reforms.html and talks about partnerships. If I were the IRS I would certainly say that there was a partnership with that hard money lender. But then I found Hugh Bromma’s article at http://www.real-estate-online.com/art-152.html It gives this quote. “if you have a debt financed property you are subject to Unrelated Business Income (UBI) tax in an IRA” . So I go back to my point that there is unrelated business income and tax due. I do stand corrected on who must pay it-Your IRA.
We are approaching the issue a little differently. My friends and I are doing participatory loans from the Roth. Arms length transactions but directing the majority of the profit to the IRA. With my recent exposure to PACtrusts, I will probably buy a large percentage of the beneficial interest in the land trust and arrange the beneficiary agreement so that my friend makes a little and the Roth makes a lot.
I hope this is clear as it is not the most common subject, but then creative real estate isn’t either.
Bud Branstetter