There have been no income level restrictions for making Roth IRA conversions since 2010, hence a high income earner can do a conversion of after-tax (non-deductible) IRA funds to a Roth IRA, which is known as a ‘backdoor’ Roth IRA. In other words, the ‘backdoor’ IRA allows a high- income earner, who has exceeded the Roth IRA annual income contribution limits, to circumvent those rules and make a Roth IRA contribution. However, as detailed below, a tax could be due on the conversion under the pro rata (aggregation) rules if the IRA holder has other traditional pre-tax IRAs that have not been taxed. In general, the taxes owed on the conversion will depend on the ratio of IRA assets that have been taxed to those that have not, making the 'backdoor' IRA unattractive for some.
Click here to read the full article at Forbes.com.
A Self-Directed IRA with Checkbook Control offers one many advantages, including diversification, speed and lower fees.
Tax Advantages: With the Self-Directed IRA LLC, you have all the tax advantages of traditional IRAs, as well as tax deferral and tax-free gains. All income and gains generated by your IRA investment will flow back to your IRA tax-free. By using a Self-Directed IRA to make investments, the IRA owner is able to defer taxes on any investment returns, thus, allowing the IRA owner to benefit from tax-free growth. Instead of paying tax on the Self-Directed IRA returns of an investment, tax is paid only at a later date when a distribution is taken, leaving the investment to grow tax-free without interruption.
A Self-Directed IRA LLC offers one the ability to use his or her retirement funds to make almost any type of investment on their own without requiring the consent of any custodian or person. The IRS only describes the type of investments that are prohibited, which are very few. The main advantages of using a self-directed IRA to make investments is that one can generate tax-deferred or tax-free gains on investments one knows and understands.
For 2017, the following are some examples of types of investments that can be made with your Self-Directed IRA LLC:
- Residential or commercial real estate
- Domestic or Foreign real estate
- Raw land
- Foreclosure property
- Mortgage pools
- Hard money lending
- Private loans
- Tax liens
- Private businesses
- Limited Liability Companies
- Limited Liability Partnerships
- Private placements
- Precious metals and certain coins
- Stocks, bonds, mutual funds
- Foreign currencies
- Hedge Funds
- Private Equity Funds
Using a Self-Directed IRA LLC to make investments offers the investor the ability to make traditional as well as non-traditional investments, such as real estate, in a tax-efficient manner.
On September 27, 2017, President Trump and the Republicans leaders presented a tax plan that included sharp cuts in tax rates to both corporations and individuals. Under the Trump tax plan, the corporate tax rate would fall to 20% from 35% as well as reduce taxes on business pass-through income to 25%. The tax plan would also allow immediate write-offs of business investment, preserve tax breaks for research and low-income housing, while also limiting deductions for interest. The tax plan also provides corporations with a one-time tax on stored foreign profits and would allow the tax-free repatriation of foreign income. The proposed tax plan would also repeal the estate tax and the alternative minimum tax. With respect to individuals, the Republication tax plan proposed would collapse seven individual income tax brackets into three and the top rate on individuals could drop to 35% from 39.6%.
Click here to read the full article on Forbes.com!
Individuals may generally rollover their retirement savings between eligible defined contribution plans, defined benefit plans and pre-tax IRAs, including SEP IRAs and SIMPLE IRAs to a Self-Directed IRA. Eligible defined contribution plans include qualified 401(k) retirement plans under Internal Revenue Code Section 401(a), 403(a), 403(b), and governmental 457(b) plans. Individuals may also roll over after-tax retirement funds to a Roth Self-Directed IRA.
Beginning in 2010, the modified Adjusted Gross Income (“AGI”) and filing status requirements for converting a Traditional IRA to a Roth IRA are eliminated.
Top 3 Most Popular Investments for September 2017
IRA Financial Trust’s Self-Directed IRA LLC offers one the ability to use his or her retirement funds to make almost any type of investment on their own without requiring the consent of any custodian or person. The IRS only describes the type of investments that are prohibited, which are very few. The main advantages of using a Self-Directed IRA to make investments is that you can generate tax-deferred or tax-free gains on investments you know and understand.
The following investments have been the most popular investments for our Self-Directed IRA clients for September 2017:
For a growing number of investors, cryptocurrency is not only the future of money, but also an attractive and potentially profitable investment asset, though highly risky and volatile. Bitcoin has become the public’s most visible and popular cryptocurrency and it is also among the oldest, having first emerged in 2009. Over one year, the market capitalization for Bitcoin has increased enormously, from around $7.16 billion in May 2016 to $27.9 billion today. As the price of Bitcoin has risen over the last year, so has the confidence among investors, including retirement account investors.
The process of buying cryptocurrency is still somewhat unclear for a lot of people. It's not a stock or a traditional investment. For most people in the U.S., Coinbase would be the easiest option to buy cryptocurrency, such as Bitcoins, Ethereum, or Litecoin. After verifying the account, the investor can add a number of payment methods, including credit or debit cards, U.S. bank accounts, or even wire transfers of funds. Cryptocurrency transactions are not anonymous and the identity of the currency owner can be traced back to a real-world identity.
As a cryptocurrency, Bitcoin is generated through the process of "mining" - essentially using your computer's processing power to solve complex algorithms called "blocks." One can buy and sell Bitcoin on an exchange, much like a physical currency exchange, converting wealth from Bitcoin to U.S. dollars and other national currencies, back to dollars or Bitcoin. And that's how money is made.
A Real Estate IRA LLC is generally also referred to as a Self Directed IRA LLC with “Checkbook Control”. A Real Estate IRA LLC or Self-Directed IRA LLC with “Checkbook Control” plan is an IRS and tax court approved structure that will allow you to use your IRA funds to purchase real estate or make almost any other type of investment tax- free!
With a Real Estate IRA LLC you will never have to seek the consent of a custodian to make a real estate investment or be subject to excessive custodian account fees based on account value and per transaction.
To establish a Real Estate IRA LLC with “Checkbook Control” structure, a limited liability company (“LLC”) is established that is owned by the IRA and managed by the IRA account owner (you). The passive custodian then transfers the IRA owner’s funds to the new IRA LLC bank account. As the manager of the IRA LLC, the IRA owner will have the authority to make real estate investment decisions on behalf of the IRA providing the IRA owner with “checkbook control” over his or her IRA funds.
When you find a real estate investment that you want to make with your IRA funds, simply write a check or wire the funds straight from your Self-Directed IRA LLC bank account to make the investment. The Self Directed IRA LLC with “checkbook control” allows you to eliminate the delays associated with an IRA custodian, enabling you to act quickly when the right real estate investment opportunity presents itself. “Checkbook Control” is especially important when it comes to making real estate or tax liens investments, since custodian delays could cause you to lose an investment opportunity.
If you take money out of an IRA before you reach the age of 59 1/2, your withdrawal is called an early distribution, and you will have to pay a 10% early distribution tax on the money unless you can meet one of the following exceptions:
There is generally no limit or restrictions on when an IRA owner may take a distribution from his or her IRA, although there may be adverse tax consequences, such as income tax and/or an additional tax on early distributions. However, pursuant to Internal revenue Code Section 72(t), there are certain instances where the Internal Revenue Service (“IRS”) allows certain IRA distributions that qualify as “hardship” distributions to be exempt from the additional tax on early distributions.
Click here to read the full article on Forbes.com!
A Self-Directed IRA LLC with “Checkbook Control” plan is an IRS and tax court approved structure that will allow you to use your IRA funds to make almost any type of investment, including real estate, tax liens, precious metals, foreign currency and much more tax free!
With a “checkbook control” Self Directed IRA LLC you will never have to seek the consent of a custodian to make an investment or be subject to excessive custodian account fees based on account value and per transaction.
To establish the Self-Directed IRA LLC “Checkbook Control” structure, a limited liability company (“LLC”) is established that is owned by the IRA and managed by the IRA account owner (you). The IRA owner’s funds are then transferred by the passive custodian to the new IRA LLC bank account. As the manager of the IRA LLC, the IRA owner will have the authority to make investment decisions on behalf of the IRA providing the IRA owner with “checkbook control” over his or her IRA funds.
When you find an investment that you want to make with your IRA funds, simply write a check or wire the funds straight from your Self Directed IRA LLC bank account to make the investment. The Self Directed IRA LLC with “checkbook control” allows you to eliminate the delays associated with an IRA custodian, enabling you to act quickly when the right investment opportunity presents itself.
The Internal Revenue Code does not describe what a Self Directed IRA can invest in, only what it cannot invest in. Internal Revenue Code Sections 408 & 4975 prohibits Disqualified Persons from engaging in certain type of transactions. The purpose of these rules is to encourage the use of IRAs for accumulation of retirement savings and to prohibit those in control of IRAs from taking advantage of the tax benefits for their personal account.
When it comes to using retirement funds to invest in a hedge fund, it is important to be mindful of the IRS prohibited transaction rules under Internal Revenue Code Section 4975. In general, the IRS has restricted certain transactions between the IRA and a “disqualified person”. The definition of a “disqualified person” (Internal Revenue Code Section 4975(e)(2)) extends into a variety of related party scenarios, but generally includes the IRA holder, any ancestors or lineal descendants of the IRA holder (i.e. parents, children, spouse, daughter-in-law, or son-in-law), and entities in which the IRA holder or a disqualified person holds a controlling or management interest. Furthermore, Internal Revenue Code Section 4975(c)(1)(D) and (E) outlines rules that relate to self-dealing or conflict of interest transactions that involves an investment that could directly or indirectly personally benefit a disqualified person. The self-dealing or conflict of interest prohibited transaction rules have the broadest application especially when it comes to hedge fund type investments.
A Simplified Employee Pension (SEP) is a special type of IRA that can be established by your employer or by you, if you are self-employed. Designed for small businesses, SEPs have many of the characteristics of qualified plans but are much simpler to establish and administer.
Increased regulation on IRA financial advisors has lead to increased demand for self-directed IRA real estate plans
IRA Financial Trust, the leading provider of self-directed IRA retirement solutions, has experienced strong demand for its self-directed IRA real estate plan solutions in light of the Department of Labor (“DOL”) new fiduciary rule. The U.S. DOL is expected to finalize new rules that would change the way financial advisors are allowed to give advice to their clients. The new rules are meant to reduce the conflict of interest among broker-dealers and financial advisors who advise consumers on how to invest their savings. Under the new rules, broker-dealers would be required to act in their clients’ best interest rather than encouraging money moves that directly benefit the broker’s bottom line. “The DOL fiduciary rule has good intentions and should help IRA investors receive better investment advice, however, we have experienced some clients incur additional fees under the new fiduciary regime,” stated Adam Bergman.
For 2017, the IRA contribution limits will remain the same as 2016. For individuals under the age of 50, the maximum Self-Directed IRA contribution for 2017 will be $5500, the same of 2016. For individuals over the age of 50, the maximum Self-Directed IRA contribution for 2017 will be $6500, the same of 2016.
For many retirement account investors, understanding how the Unrelated Business Taxable Income Rules work, also known as UBTI, UBIT, or debt-financed income rules, and how they may potentially apply to one’s retirement account investment has been a challenge. The main reason is that the majority of IRA or 401(k) plan investors invest in traditional types of investments, such as equities, mutual funds, and ETFs, which do not trigger the application of the UBTI tax rules since most passive investments that a retirement account might invest in are exempt from the UBTI rules, such as interest, dividends, and capital gains.
Click here to read the full article on Forbes.com!
Bitcoin is usually described as virtual currency. That’s useful shorthand, but is it really money? And should it be taxed as if it is? Or is it a capital asset? How about a commodity? Or what about a collectible? Most commentators have viewed bitcoins either as a virtual type of currency or capital asset. However, the potential still exists that the IRS could argue that bitcoins do not satisfy the main functions of money and acts more like a stamp or other collectible than a currency.
The Self Directed IRA LLC structure was affirmed in the Tax Court case Swanson v. Commissioner, 106 T.C. 76 (1996), and further confirmed by the IRS in Field Service Advisory (FSA) 200128011 (April 6, 2001).
In Swanson v. Commissioner, 106 T.C. 76 (1996), the Tax Court, in ruling against the IRS that the funding of a new entity by an IRA for self directing assets was not a prohibited transaction, stated the following:
“We find that it was unreasonable for [the IRS] to maintain that a prohibited transaction occurred when Worldwide's stock was acquired by IRA #1. The stock acquired in that transaction was newly issued -- prior to that point in time, Worldwide had no shares or shareholders. A corporation without shares or shareholders does not fit within the definition of a disqualified person under section 4975(e)(2)(G). It was only after Worldwide issued its stock to IRA #1 that petitioner held a beneficial interest in Worldwide's stock, thereby causing Worldwide to become a disqualified person under section 4975(e)(2)(G).”
Zacky v. Commissioner, TC Memo 2004-130
The Zacky case involved three separate loans all of which were prohibited transactions under Section 4975(c)(1)(B), (D) and (E).
The taxpayer, Mr. Zacky, was the president and sole owner of Aspects Inc. (“Aspects”), a corporation that maintained a qualified profit sharing plan. Mr. Zacky was one of many participants under the plan and also served the plan’s sole trustee. Mr. Zacky borrowed funds (Loan #1) from the plan to pay Aspects payroll liability that was about to become due.
At some point thereafter the plan lent funds (Loan #2) to a related corporation, Inland Empire Properties, Inc. (“Inland”). Mr. Zacky was also the president and sole owner of Inland, which had no other employees. Inland owned and leased to Aspects and other tenants a commercial building. The purpose of Loan #2 was to enable Mr. Zacky to pay off an outstanding car loan, and to that end Mr. Zacky transferred title to the vehicle to Inland shortly after Loan #2 was made.
Subsequent to Loan #2, the plan made another loan to Inland (Loan #3) to enable Inland to pay mortgage and real estate taxes due on the building it owned.
No principal or interest had been paid on any of the loans. Moreover, Mr. Zacky, in his capacity as the plan’s trustee, did not seek nor attempt to compel repayment (but did require two loans to other participants to be repaid).
On June 9, 2017, the Department of Labor's (DOL) final rule meaningfully expanded when a person is deemed to be treated as a fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (Code) as a result of providing investment advice. The final rule was initially set to become applicable on April 10, 2017, but the DOL delayed the final rule's applicability date for sixty days, until June 9, 2017 and also issued a new temporary enforcement policy for the transition period commencing on June 9th and ending on December 31, 2017...
Click here to read the full article on Forbes.com!
Making an investment through a Self-Directed Roth IRA LLC can be done in a few easy steps:
1. Set up a Self-Directed Roth IRA LLC.
With IRA Financial Trust, you no longer have to spend $2000 to $5,000 or more to set up your Self-Directed Roth IRA LLC.
We provide the following all for one low price
- Free tax consultation with our in-house retirement tax professionals
- Setup your LLC in the State of your choice
- Prepare and file the Articles of Organization with the State
- Generate a special purpose, attorney-reviewed Self-Directed Roth IRA LLC Operating Agreement
- Generate a special purpose, attorney-reviewed Subscription Agreement, as required by the Custodian
- Obtain the EIN from the IRS
- Co-ordinate setup with the Custodian of your Choice
- Free tax and IRA support regarding the Self-Directed Roth IRA LLC Structure
- Expedited Service Guarantee!
- Satisfaction Guaranteed!
The IRA Financial Trust Company will take care of the entire setup of your Self-Directed Roth IRA LLC “Checkbook Control” structure. The whole process can be handled by phone, email, fax, or mail and typically takes between 7-21 days to complete, the timing largely depending on the state of formation and the custodian holding your retirement funds. Our IRA experts and tax and ERISA professionals are onsite greatly reducing the setup time and cost. Most importantly, each client of the IRA Financial Trust Company is assigned a retirement tax professionals to help with the establishment of the Self-Directed Roth IRA LLC "Checkbook Control" structure. You will find that our fee for this service is significantly less than other companies that perform the same or similar services.
No – not with a Self Directed IRA LLC. All investment decisions are made by you, as manager of the Self Directed IRA LLC. It’s simple - when you want to make an investment, you write a check, use your debit card, wire funds, etc. All documents can be signed by you, as manager of the LLC.
IRA Financial Trust, the leading provider of self-directed IRA LLC solutions, announces the findings of an internal report that shows that hard money lending for real estate has become a popular investment option for self-directed IRA investors. The IRS has always permitted an IRA to lend money to non-disqualified persons. The definition of a “disqualified person” (Internal Revenue Code Section 4975(e)(2)) extends into a variety of related party scenarios, but generally includes the IRA holder, any ancestors or lineal descendants of the IRA holder, and entities in which the IRA holder holds a controlling equity or management interest.
Internal Revenue Code Section 514 requires debt-financed income to be included in unrelated business taxable income. It was enacted in 1969 for reasons best understood in their historical context.