Non Recourse Mortgage Loans
If I understand it correctly, IRS only wants us to get a non recourse mortgage loans on these IRA accounts. My question is what would be the penalty if one puts a regular mortgage on the property held by IRA account. The only difference is one would sign a personal note that has not anything to do with the IRA account. Still, the question is; is there a penalty and what would that be. Please let me know.
Thanks
I look forward to your comments
Permalink Submitted by Jose Morales on Fri, 2015-08-07 00:03
Providing a personal note would be a prohibited transaction. The penalty will be a full disbursement of the IRA account, reported as if it has occurred on the first day of the year in which the penalty occurred. There would be no rollover option to offset the distribution and if you are under 59 1/2 you would also owe a 10% tax penalty. I’ll find one of the tax court rulings in which someone did exactly as you suggested for you to read and post the link here.
Permalink Submitted by Jose Morales on Fri, 2015-08-07 00:22
In this case the individual provided a personal guarantee for a loan that was taken out by a corporation owned by the individual’s IRA (Peek vs. Commissioner) http://ustaxcourt.gov/InOpHistoric/PeekandFleck.TC.WPD.pdfThere is also a recent ruling specifically regarding real estate financing and a personal guarantee (promissory note) but I’ll have to keep searching and post when I find.