IRA acct funded with real estate
I have a well to do client that is going to become a limited partner in an LLC that purchases Real estate for the sole purpose of renting the land to a restaurant franchisee. He was told he could invest in the LLC using a portion of his self directed IRA. First, is that true? Second, doe it make sense? Third, what would possibly be the long term advantage to doing so? I can imagine it would be troublesome to unravel the thing if he ever wants to sell it. Any help on this topic is greatly appreciated
Permalink Submitted by Jose Morales on Fri, 2016-10-28 17:23
Most self directed IRA custodians provide education services to help their clients navigate the complexities of these types of investments within an IRA. Very briefly, yes cash within an IRA can be used to fund an LLC which then uses those funds for things such as purchasing real estate. There are various tax issues, such as UBIT, to consider and it is the responsibility of the individual to be aware not to wander into the area of prohibited transactions which will nullify the accounts standing as an IRA. A great place to start is with the self-directed IRA custodian, being cautious to consider that their business model is to promote this type of activity and therefore downplay the complexity or dangers.
Permalink Submitted by Robert E Burk on Fri, 2016-10-28 18:19
Thank you so much!!! Very helpful