rental property within an IRA
80 year old Arizona client has a rental property in AZ, wants to buy a few properties and rent them out.
Can he own the properties within a special IRA?
Current value of IRA here at Merrill Lynch is $2 million, all in a CD ladder.
how do we title this and who can handle this? Merrill Lynch does not permit this but we thought an attorney could draft a special document within IRA guidelines. Please advise.
Marcy P.
Permalink Submitted by Alan Spross on Mon, 2009-06-01 23:50
Yes, this can be done. She should transfer the appropriate amount to a self directed IRA custodian such as Guidant. These custodians generally know how to set up the IRA so that the taxpayer does not commit a prohibited transaction, and has the cash flow to meet her RMD requirements and expenses of the real estate such as repairs and taxes. Note that since she is subject to RMDs, which are in turn based on the year end value of her IRA accounts, then there must be a way to value the real estate every Dec 31st, hopefully a cheaper way than to pay for appraisals every year.
Finally, if the CDs are laddered, some must be sold if they are broker sold CDs, or if bank CDs, they would be subject to early withdrawal penalties to free up the cash to transfer to the self directed IRA custodian. You can do a search for self directed IRA custodians, there are 5-10 fairly large firms that specialize in these IRAs.