Self Directed IRA with Checkbook Control
I and 5 other family members each have a Self Directed IRA with Checkbook Control. Each of our IRAs owns a LLC and we each manage our own LLC. We are investing in similar investment opportunities, we primarily loan money to a business that flips houses. This business is not owned or managed by any family member. We would like to consolidate our money into one LLC for convenience and diversification.
Our thought is to create a New LLC, a second tier entity if you will. Then each of the 6 IRA LLCs would invest in the New LLC and have ownership in the New LLC based on their respective contribution to the New LLC. Our questions revolve around this idea.
1) Are there any issues with the IRS for this type of structure?
2) Are there any Federal or state Securities Law issues with this structure?
3) Are there any accounting issues with this structure?
Permalink Submitted by Jose Morales on Wed, 2014-10-08 21:19
These are questions that should be presented to a lawyer (preferrably with retirement plan/ERISA experience) and/or an accountant (also preferrably with retirement plan/ERISA experience). Anyone involving themselves in a complicated self directed IRA structure should understand that they will have the added expense of paying for legal/regulatory and accounting advice as part of the cost of maintaining a self directed IRA.
Permalink Submitted by Alan - IRA critic on Wed, 2014-10-08 23:09
Note also that the IRS has revised Form 5498 requiring the IRA custodian to complete new boxes 15a and 15b of the 5498. This identifies both the valuation and the type of alternative investment held in the IRA. The more complex structure involved with your IRA, the more likely you could end up costly pitfalls ranging from UBIT to prohibited transactions and disqualified persons. You might check with your IRA custodian who likely holds large numbers of these checkbook IRAs as they would be most likely to know the level and nature of IRS activity and inquiries regarding these accounts. That said, if problems mount the custodian will probably be more focused on their own problems.