IRA in Panamanian Real Estate
A friend of mine wants to buy real estate in the Republic of Panama.
I have read in Wikipedia that you do not need a custodian if you choose an IRA LLC structure
Does this also apply if you establish a panamanian “Sociedad Anonima” (S.A.) and invest your IRA funds in real estate in Panama??
rgrds
Erika
Permalink Submitted by mk foss on Sun, 2009-05-10 23:35
All IRAs must have a custodian. The IRS has rules as to custodian qualifications. I believe that one of the requirements is that the custodian be a U.S. corporation.
Permalink Submitted by Jose Morales on Mon, 2009-05-11 17:24
As stated, all IRAs must have an approved custodian.
There are companies out there that market so called “self-directed” IRAs in which you invest your IRA funds in LLCs and then these LLCs in turn invest in all sorts of non-conventional IRA assests. These are usually third party administrators that do not act as the custodian for the IRA however. Care must be taken to not find yourself engaging in a prohibited transaction. The ultimate responsibility for following all IRS rules with regards to IRAs is the individual themselves.
Permalink Submitted by Erika Sarosi on Mon, 2009-05-11 21:04
That is the type of IRA I was referring to.
Wikipedia says that employing an LLC Structure you can execute transactions yourself w/o a custodian. (see below)
So my question was: can this LLC be a Panamanian Sociedad Anonima (S..A..)
“In an effort to reduce fees, paperwork, and processing delays, some self-directed IRA investors choose to employ an IRA LLC structure. In such a structure the accountholder directs his IRA custodian to invest into a limited liability company that he manages himself. The accountholder can then execute transactions on the LLC level without the involvement of the IRA custodian, thus reducing fees and eliminating custodian transactional fees and delays.”
http://en.wikipedia.org/wiki/Self-Directed_IRA
Permalink Submitted by Alan Spross on Mon, 2009-05-11 21:56
There still must be an actual IRA custodian with these self directed checkbook IRA accounts. While the IRA owner may be able to handle expenses and purchases by writing checks, the account is still held by an IRA custodian such as Guidant. There are also custodian fees that must be paid to these IRA custodians even if the IRA owner has the freedom to handle many of the actual business transactions.
People that are close to RMD age should think twice about these structures since meeting the RMD rules requires a year end value for the IRA. With real estate, this might mean an annual appraisal to justify the amount that must be paid out as RMDs. There must also be liquidity to fund the RMDs.
Permalink Submitted by Erika Sarosi on Wed, 2009-05-13 19:35
I understand, a self directed IRA also must have a custodian.
But I still would like to know if a Panamanian SA can be used in the so called “LLC structure”
TYIA
Erika
Permalink Submitted by Jose Morales on Thu, 2009-05-14 18:40
it is highly unlikely that anyone not familiar with Panamanian SAs, or who knows the specifics about the custodian, third party administrator, or LLC can answer this question.
Permalink Submitted by Erika Sarosi on Sat, 2009-05-16 06:55
Thank you all for yor help!
I’ll tell my friend he should find someone with IRA knowledge and familiar with panamanian SA.
rgrds
Erika
Permalink Submitted by Alan Spross on Sat, 2009-05-16 19:01
I have not read this yet, but you may wish to provide this info to your friend:
http://www.groom.com/documents/IRAMythArticle5.12.09_000.pdf