SDIRA Prohibited Transaction

Submitted by Jesse Ransom on Tue, 2023-09-19 22:54

I want to go ahead and say thanks for any helpful information.

My grandmother left her house to her three kids; however my Dads passed away about three weeks before his mother, so the house was left to his brother and sister, my aunt and uncle.

They put the house on the market around 200k even though it needed some repair work they weren’t willing to do. After months of being on the market, mainly due to repairs not being made, they are down to investors offering 140k.

Since it’s my aunt and uncle who inherited the house, can I buy it from them for 140k with my checkbook SDIRA LLC, pay for repair out of the LLC and rent it?

Thanks,
Jesse



Submitted by Alan - IRA critic on Tue, 2023-09-19 23:11

Your aunt and uncle are not “disqualified persons” so you can purchase the property from them. Of course there are many other prohibited transaction pitfalls with direct IRA ownership of real estate. Perhaps your SDIRA custodian can provide material detailing these pitfalls. Obviously, you cannot use the property for personal use,  work on it yourself. or rent it to family members.

Submitted by Jesse Ransom on Tue, 2023-09-19 23:54

Thanks for your reply.  The one the thing I’m worried about is it says something to the fact of the estate of my grand mother, I don’t know if it is a probate thing.  However, my aunt and uncle are who will benefit from the sell.

Submitted by Alan - IRA critic on Wed, 2023-09-20 00:30

You did not descend from an estate, so I doubt that would be an issue even if you purchased from the estate, but probably better to purchase from aunt and uncle to remove any doubt. Check with your SD IRA custodian since they would be the one to report any prohibited transaction.

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