Distributing Land In Kind From Roth IRA-LLC
My Roth IRA is the sole member (owner) of an IRA-LLC which holds title a 10 acre tract of land. Can I have one acre of the land appraised, transfer it to my Roth IRA account held by my custodian and then take distribution of the one acre tract from my Roth IRA account?. I am over 72 and have had my Roth IRA for over five years. I regularly move cash from my IRA-LLC to my Roth IRA account held by my custodian and take distribution from the custodial account. Does anyone see a legal prohibition to doing the same with a one acre portion of a ten acre tract of land held by my IRA-LLC?
Permalink Submitted by Alan - IRA critic on Fri, 2015-01-02 17:56
Your Roth custodian may not accept a conversion of land. The custodian would have to be a self directed custodian and also will probably require the one acre to have a separate legal description and parcel number since you are only having one specific acre appraised. If the 10 acres is not split, perhaps they will accept a 10% undivided interest in the 10 acre parcel, but the current TIRA custodian would then require acceptable valuation of the entire 10 acres. Another factor here is that you must fully satisfy your TIRA RMD before you can convert any additional amounts to a Roth IRA because the first distribution in any year is applied to the RMD and you cannot roll over an RMD. But if all the above comes together, you can do this.
Permalink Submitted by Patrick Kennedy on Wed, 2015-02-18 05:50
Thanks for the input
Permalink Submitted by Ben Meyer on Wed, 2015-02-18 15:19
It is also possible that a new deed may need to be recorded. If the municipality assigns a new parcel number with a legal description, the municipality may require approval of a subdivision plan, and may have zoning implications. This depends on state law and local practice.
Permalink Submitted by Ben Meyer on Wed, 2015-02-18 15:42
I don’t quite understand something here. Specifically, is the current Roth IRA custodian required to issue an annual form 5498 with the fair market value of the land, as with other IRA assets? If so, how is that done? An annual appraisal would sound burdensome.
Permalink Submitted by Jose Morales on Wed, 2015-02-18 16:19
The fair market value must be determined and reported every year, no exceptions. When it comes to these types of non-traditional assets held in an IRA account you do run into sometimes difficult situations such as yearly valuation. This is one of the reasons why the IRS has updated forms 5498 and 1099-R to not only show dollar amounts but also the investment type within the IRA (for either contributions, rollovers, or distributions). A custodian that already deals with these types of assets should have a way to accomplish a yearly valuation in place, but I know that some custodians simply allow the IRA owner to self report a value each year.