Posted by John Merchant on January 15, 2011 at 19:35:27:
IRS has already tried but lost this battle in case of Swanson vs. Commissioner, 106 US Tax Court 76 (1996) which you can quickly find on Google.
Swansons formed an LLC to own and operate their family business using IRA accounts and other, non-IRA money and IRS said “no, can’t do that” but Tax Court didn’t agree and told the IRS to buzz off.
Self-Directed (Real Estate) IRA - Posted by Bruce
Posted by Bruce on January 09, 2011 at 10:52:02:
Hello Colleagues,
I am planning to setup a Self-Directed IRA. Should I create an LLC or keep the account in my personal name, such that income and expenses occur as:
XYZ Trust Co. Custodian FBO “my name”
or,
XYZ Trust Co. Custodian FBO “LLC name”
? In other words, does the latter offer better protection, or are there benefits to creating the LLC or is keeping my account in my personal name with the Custodian suitable?
Thanks…Bruce
Re: Self-Directed (Real Estate) IRA - Posted by Ken
Posted by Ken on January 14, 2011 at 13:53:14:
If you form a LLC and have control does this create UBIT which requires tax return and taxes due? I like the idea of the LLC but not if it requires taxes and tax returns.
Staying in control - Posted by John Merchant
Posted by John Merchant on January 11, 2011 at 10:11:41:
It’s worked out well for my clients to have their SDIRAs form LLCs, use that SDIRA $$$ to buy such LLCs, then they (the SDIRA owner)stay in control, write the checks, etc. w/o having to ask the bank custodian for permission to do anything.
I’ve formed LLCs in a number of states which were acquired by the clients’ LLCs and HE/SHE then stayed in charge of the money, etc.
Not all SDIRA custodian cos like this strategy the best as they like to be in charge, so look around and ask the custodian cos questions before opening accts with them. I’ve recently been using Viking Bank of Seattle for this as they’re local to me, I can get same day services, etc.
Re: Self-Directed (Real Estate) IRA - Posted by BK
Posted by BK on January 15, 2011 at 06:03:04:
Sorry, don’t know what “UBIT” is. But, the LLC I have now, requires a very simple RCT-101 for Pennsylvania, and all the Schedules C and E for the LLC “pass-through” into the Personal Fed return. I hold meetings once per year, with myself. A corp requires the Fed Tax returns - not my “Disregarded Entity” LLC. thanks.
UBIT no killer - Posted by John Merchant
Posted by John Merchant on January 14, 2011 at 19:26:39:
Don’t get blown out of shape by UBIT issue, as your accountant can quickly figure that and it needn’t throw you.
Personally I’d rather have some UBIT than otherwise just leave my IRA money in bank.
And if it’s due, it’s due regardless of who’s in control.
Re: Staying in control - Posted by Bruce
Posted by Bruce on January 12, 2011 at 13:08:17:
Thanks…good points. Seems like the LLC is the right approach. I am thinking about going with Equity Trust; they don’t require permission to write checks, but you still go through them to make payments; they say payments are issued within a day.
Re: UBIT no killer - Posted by Ken
Posted by Ken on January 15, 2011 at 18:41:30:
I have a self directed IRA and have 2 houses and a few small mortgages but I have been told with the LLC that is what creates the UBIT and do not want to deal with a tax return for my IRA.Also I believe,right or wrong,the IRAs with an LLC are going to be scrutnized and audited by the IRS much more than an IRA with properties held by the trustee