IRA distribution to a self-directed IRA LLC.
Taxpayer received notice from IRS that the distribution from IRA is taxable. The distribution came from a traditional IRA and was deposited into an self-directed LLC with the IRA as owner. First, is this ok to do and second what do we have to present to the IRS that the LLC is an IRA?
Permalink Submitted by Alan - IRA critic on Tue, 2023-10-24 19:35
The self directed IRA custodian should have issued a 5498 reporting a rollover contribution. The distribution and rollover should be reported on Form 1040 for the year of the distribution. If it was not reported, that would trigger a tax due notice resulting from the 1099R.
Permalink Submitted by Marina Ferrone on Wed, 2023-10-25 16:09
Hello Alan – Thank you very much for your reply. A couple of facts that may be different. The LLC is an investment real estate partnership. The taxpayer distributed $150K from his IRA to this LLC and he is the IRA owner (partner) in this partnership. He also contributed additional aftertax monies into the same partnership as the IRA partner (himself). Do you see issues with these transactions?
Permalink Submitted by Marina Ferrone on Thu, 2023-10-26 21:17
We have a situation where JP Morgan Stanley distributed $150K to a taxpayer. They issued a 1099-R with code 7. The taxpayer rolled the money into a self-directed IRA via a partnership real estate investment within the 60 days. The IRS is claiming this is taxable, how do we prove that this was rolled over correctly? The partnership did not issue form 5498 for the IRA owner.
Permalink Submitted by Alan - IRA critic on Fri, 2023-10-27 02:34
The self directed IRA custodian issues the 5498, not the partnership. If they did not, something went wrong. Was the deposit flagged as a rollover contribution, or perhaps it was not even deposited into the IRA.