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.
President Trump’s decision to delay the implantation of President Obama’s fiduciary rule, which was in the works for almost six years, put’s a pause on a framework that would have regulated the investment advice given to 401(k) plans and IRAs equally.
Here's an article from Forbes.com talking about the recent court case involving the Roth IRA DISC strategy -
On February 16, 2017, the United States Appeals Court for the Sixth Circuit in Summa Holdings, Inc. v. Commissioner of Internal Revenue held that using DISC and Roth IRA strategy for their Congressional-sanctioned purpose, tax avoidance, was permissible. The Appeals Court reversed a previous Tax Court ruling (Summa Holdings Inc. v. Commissioner, T.C. Memo 2015-119) that disallowed a domestic international sales corporation (DISC) Roth IRA strategy on the grounds that it had no nontax business purpose.
IRA Financial Trust, the leading provider of Self-Directed IRA LLC solutions, announces a specially designed Self-Directed IRA LLC solution for hard money lenders looking to generate tax-deferred or tax-free returns. Because most financial institutions continue to require solid credit scores and spend weeks reviewing financial statements, tax returns and business plans, there is a growing need for quick financing for many individuals, small business and investors, especially real estate developers and builders for their real estate projects. As a result, IRA Financial Group has partnered with the IRA Financial Trust Company to design a special Checkbook Control Self-Directed IRA LLC program designed specifically for hard money lenders.
This article originally appeared on Forbes.com, written by our own Adam Bergman -
Every IRA custodian is required to report annually to the Internal Revenue Service (“IRS”) the fair market value of each IRA it holds. The IRA custodian will report the fair market value of the IRA to the IRS using IRS Form 5498. Most IRA holders are unaware of this process since the majority of IRAs are invested in traditional investments, such as stocks and mutual funds, and the IRA custodian will be able to calculate the value of the IRA itself using publicly available information as of December 31 of the previous year. For example, if Ken Smith has an IRA with Trust Company X and owns 100 shares of Apple, Trust Company X can quickly calculate the value of the IRA based off the share price as of December 31. However, in the case of alternative assets, such as real estate, private equity, tax liens, etc., calculating the fair market value of the IRA investment could prove more difficult.
Unbeknownst to many retirement account holders, payment of individual retirement account (“IRA”) custodian/trustee fees is generally tax-deductible. Under Internal Revenue Service (“IRS”) rules, in place of the standard deduction, one can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040 or Form 1040NR). One can only claim the amount of expenses that is more than 2% of their adjusted gross income. For example, Amy, a single taxpayer, has an adjusted gross income of $50,000. She may deduct her miscellaneous itemized deductions only to the extent that they exceed 2% of $50,000, or $1,000. Some of the more popular itemized deductions are for: gifts to charity, home mortgage interest, tax preparation fees, and medical and dental expenses.
Self-Directed IRA Custodian fees may be tax deductible for taxpayers who itemize deductions
IRA Financial Trust, the leading provider of self-directed IRA plans, is proud to announce the introduction of its tax deductible self-directed IRA structure. Unbeknownst to many retirement account holders, payment of IRA custodian/trustee fees may be generally tax-deductible. Under Internal Revenue Service rules, in place of the standard deduction, one can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040 or Form 1040NR). One can only claim the amount of expenses that is more than 2% of their adjusted gross income. With IRA Financial Trust’s self-directed IRA account, these annual IRA management fees may be tax deductible, subject to the itemized deduction rules and so long as the fees are separately billed and paid for using IRA funds. “IRA management fees paid by personal cash or check that are not deducted from the IRA may be deducted as investment expenses, subject to the itemized deduction limits,” according to Adam Bergman, President of the IRA Financial Trust.
Self-Directed IRAs are generally permitted to engage in most types of investments, however, if a Self Directed IRA engages in certain types of "prohibited transactions" or invests in life insurance or collectibles you may jeopardize the tax-deferred status of your IRA account. This could lead to the disqualification of the IRA and severe tax consequences. Therefore, it is important that you familiarize yourself with the IRA rules.
The maximum contribution limit for a self-directed IRA for 2017 is $5,500 or $6,500 if you’re age 50 or older, or your taxable compensation for the year, if less. Contributions to a self-directed Roth IRA may be limited based on your filing status and income.
Contributions made to a self-directed IRA LLC must be made to the IRA administrator/custodian and may not be contributed directly to the LLC. Once the IRA contribution is made to the IRA administrator/custodian, the funds can then be transferred to the IRA LLC.
Here's the second of two articles that originally appeared on Forbes.com talking about the fiduciary rules -
Now that President Trump has rescinded the fiduciary rule, what exactly does that mean for IRA investors? The fiduciary rule, developed by the Obama administration, aimed to protect retirement savers from bad advice and keep more money in their pockets. It also sought to indirectly change the way the industry structures its products and advisor compensation policies.
Without the fiduciary rule, brokers who work under the suitability standard are required to make recommendations that are suitable for their clients, not those that are in their best interest. The belief is that some brokers make recommendations that pay them commissions rather than those that are best for their clients, supporters of the rule say. Whereas, under the fiduciary 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. Opponents of the fiduciary have held that if enacted, it would prove harmful to retirement investors with small accounts and limit their investment opportunities and investment advice opportunities.
Here's the first of two articles that originally appeared on Forbes.com President Trump's plan to rescind the fiduciary rules -
On February 3, 2017, President Trump announced that he will use a memorandum to ask the labor secretary to consider rescinding a rule, better known as the fiduciary rules, set to go into effect in April 2017 that orders retirement advisers, overseeing about $3 trillion in assets, to act in the best interest of their clients.
The fiduciary rule, rolled out by the Obama administration, took many years to develop. The fiduciary rule aimed to protect retirement savers from bad advice and keep more money in their pockets. It also sought to indirectly change the way the industry structures its products and advisor compensation policies.
Under the fiduciary 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. Among the requirements in the rule, brokers have to justify the varying compensation they can receive for recommending one investment product over another to a retirement saver. Brokers said that rule makes sales fees on some mutual funds, known as sales loads, and some funds’ differing share-class prices problematic for accounts that charge investors for each transaction made.
This article orignally appeared on Forbes.com -
In general, one may be able to claim a deduction on their individual federal income tax return for the amount contributed to a pre-tax Individual retirement account (“IRA”), also known as a Traditional IRA. Whereas, after tax or Roth IRA contributions are not tax deductible. For 2017, the maximum IRA contribution is $5500 and $6500 if over the age of fifty. However, in the case of an individual that is covered by an employer qualified retirement plan, such as 401(k) plan, the IRA contribution amount that individual can deduct could be limited by his or her modified adjusted gross income (“AGI”). An individual’s AGI is essentially the amount of gross income earned during the year, less certain adjustments. One can find the allowable reductions to your income on the front page of IRS Form 1040.
A Self-Directed IRA LLC is a type of IRA that allows the IRA holder (you) to gain control over your retirement funds so you have the ability to self-direct the type investments that you want to make using your retirement funds. With a traditional Self-Directed IRA, you as the IRA holder must direct the IRA custodian to make the investment you wish to make using your retirement funds, which often triggers high custodian fees and transaction delays. Whereas, with a Self-Directed IRA LLC with Checkbook Control you as the IRA LLC manager will have the ability to make traditional investments (stocks, mutual funds) as well as non-traditional investments (real estate, precious metals, etc) tax-free and without custodian consent.
Using a Self-Directed Roth IRA LLC presents a number of exciting tax planning opportunities. Whether you currently have a Traditional IRA or a Roth IRA, IRA Financial Trust’s in-house tax and ERISA professionals have significant experience helping clients use a Self-Directed Roth IRA LLC to maximize their tax benefits and investment returns.
Here's another article written by our own Adam Bergman which appeared on Forbes.com -
Unfortunately, the Internal Revenue Service (“IRS”) does not allow you to keep retirement funds in your account indefinitely. The required minimum distribution rules (“RMD”) were created in order to guarantee the flow of IRA funds into the federal income tax system as well as to encourage IRA owners to use their retirement funds during their retirement.
One generally has to start taking withdrawals from your IRA, SIMPLE IRA, SEP IRA, or retirement plan account when reaching the age 70½ or as the beneficiary recipient of an inherited IRA. Of interest, Roth IRAs do not require withdrawals until after the death of the owner.
This article orignally appeared on Forbes.com -
Nearly a quarter of Americans were born between 1946 and 1964, the typical definition of the baby boom generation. That is more than 75 million people. For baby boomers, the largest generation in U.S. history before the millennials, 2017 will begin a process where hundreds of billions of retirement dollars will be required to be taken as taxable distribution under the Internal Revenue Service’s required minimum distribution (“RMD”) rules. Some estimates peg baby boomer retirement account values at close to $10 billion dollars as of 2016.
In general, the penalty under Internal Revenue Code Section 4975 generally starts out at 15% for most type of retirement plans; however, the penalty is harsher for self-directed IRAs.
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 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
- 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
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.
Individual retirement accounts, or IRAs, exist in many forms. In general, if you have income from working for yourself or someone else, you may set up and contribute to an IRA. The major advantage of using a traditional IRA is that contributions are tax-deductible. Furthermore, IRA funds can be used for any purpose, including investing in real estate, tax liens, stock, bonds, and gold.
Alternative investments such as real estate have always been permitted in IRAs, but few people seemed to know about this option- until the last several years. This is because large financial institutions have little incentive to recommend something other than stocks, bonds or mutual funds which bring in extremely profitable commission and fees for them.
Since the creation of individual retirement accounts (“IRAs”) the Internal Revenue Service (“IRS”) has always permitted an IRA or other retirement account to purchase, hold, or flip real estate. In fact, it states it right on the IRS website. By using a Self-Directed IRA, one will gain the ability to buy real estate, such as raw land, residential or commercial property, flip homes, and much more without paying tax. One of the major advantages of flipping homes with a retirement account is that all gains are tax-deferred until a distribution is taken (Traditional IRA distributions are not required until the IRA owner turns 70 1/2). In the case of a Roth IRA, all gains are tax-free.
When engaging in real estate transaction, such as a house flipping transaction, one must keep in mind the Unrelated Business Taxable Income Rules (also known as UBTI or UBIT) which can be found in Internal Revenue Code Section 512.
In 1997, Congress introduced the Roth IRA to be like a traditional IRA, but with a few attractive modifications. The big advantage of a Roth IRA is that if you qualify to make contributions, all distributions from the Roth IRA are tax-free – even the investment returns – as long as the distributions meet certain requirements. In addition, unlike traditional IRAs, you may contribute to a Roth IRA for as long as you continue to have earned income (in the case of a traditional IRA, you can’t make contributions after you reach age 701/2).
Yes – you may have multiple IRA accounts in your Self Directed IRA LLC. Each account would be a member of the LLC and have an interest in the LLC based on the amount contributed. Profits and losses would be allocated to the IRA accounts based on the accounts percentage interest.
Please contact one of our Self Directed IRA Experts at 800-472-1043 for more information.
Using a Self-Directed IRA to make investments is seen as a tax attractive option because the gains from the investment would generally flow back to the retirement account without being subject to tax. News that Mitt Romney had tens of millions of dollars in his IRA generated from numerous Bain Capital investments over the years has many people in the hedge fund and private equity world buzzing about the potential of using a self-directed IRA to start or fund an investment fund.
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.
In a petition filed November 17, 2016 with the U.S. District Court for the Northern District of California, the U.S. Department of Justice (DOJ) asked the court for a John Doe summons to be issued on bitcoin exchanger Coinbase Inc.
The John Doe summons would require Coinbase Inc., the largest bitcoin exchanger in the U.S., to provide the DOJ with information related to all bitcoin transactions it processed between 2013 and 2015. The DOJ would then share the information received with the Internal Revenue Service to be matched against filed tax returns. The IRS would be looking for bitcoin transactions that have the potential for successful criminal investigation and prosecution.