purchase of investment residential property from IRA after age 59 1/2
A client wants to know if she can use money from her rollover IRA to purchase a single family dwelling investment property that will be rented out and not for my client’s personal use. She is over age 59 1/2 . What are the tax implications and When the rent is paid does it go into her IRA account?
Also when she is over age 70 1/2 can this rental income be paid to her as a RMD required minimum distribution?
Hal
Permalink Submitted by Alan - IRA critic on Tue, 2015-08-04 20:07
Client will need a self directed IRA custodian. All expenses for the property including insurance, property taxes, legal fees, owner paid utilities, and maintenance must be paid from the IRA and rents deposited to the IRA. Rental income must be deposited into the IRA (not paid directly to client) and the year end value of the IRA for the prior year will determine the RMD for the following year. The IRA custodian must report the fair market value of the property on Form 5498 every year to the IRS and client and that is used to determine the RMD. An appraisal may be needed periodically to determine that value. Any distribution paid to the client other than for the expenses of the property will be credited to the RMD for the year.