IRA owner JV with IRA LLC
It has been proposed to me that I can form an LLC in which my wife and I can be members as well as our IRA LLC. We could contribute property (land) we own and the IRA LLC could contribute cash which would be used to build on the land. Does anyone know if this is allowable without running into problems with the prohibated transaction rules? Thank you in advance for your time.
Permalink Submitted by Jose Morales on Tue, 2009-07-14 15:48
You cannot sell, contribute, or gift property to your IRA. Likewise, you cannot buy property from your IRA.
This is just one of many articles that you can find on the internet that covers a few important details about this topic: [url]http://www.fairmark.com/rothira/real-prohibited.htm%5B/url%5D
Permalink Submitted by Ron Bishop on Wed, 2009-07-15 04:41
Just to be clear, the arrangement being proposed would have my wife and I and our IRA LLC as members of an investment LLC. My wife and I would contribute property and the IRA LLC would contribute cash. Profits would be allocated according to the ownership percentages. The property will not be sold to the IRA LLC.
Permalink Submitted by Clyde Wolf on Wed, 2009-07-15 17:34
Page 9 of IRS Pub 590, under the heading, “How Can A Traditional IRA be Set Up? says,
“Contributions, except for rollovers, must be in cash.”
Permalink Submitted by Ron Bishop on Wed, 2009-07-15 19:58
There will be no contributions to an IRA, just an IRA investing in the same JV as I would also be investing in. The part I am not sure about is my ability to contribute real property to a JV that my IRA LLC is contributing cash to.
Permalink Submitted by Jose Morales on Thu, 2009-07-16 15:47
At this point I’m sure no amount of information given is going to matter, but I’ll keep playing along anyway… So your plan is to start a joint investment venture with your own IRA LLC, and invest the cash in the IRA (that comes from who knows where…) in property that you and your wife already own? It seems more like you are trying to find a convoluted way around the very clear prohibition on self dealing.
Exactly who made this proposal to you?