SDIRA partnering on timberland deal

[Greg Sonnier]

I'm looking to invest my SDIRA money in a timberland deal partnered with another individual. I'm sure there's several ways of structuring the deal/partnership. Looking to see what others have done in similar case. I understand if we form an LLC together and go get a loan it will have to be non recourse since my portion is SDIRA $. Is there a way to structure the deal so the individual and my SDIRA can partner and get traditional financing from a local land bank? Trying to understand all options.

[Carl Fischer]

@Greg Sonnier 

If you use a partnership /LLC/or other entity with your IRA and a "disqualified person" as the other party you are correct you will have to use a non-recourse loan and UBIT will most likely be required. However, if the other party is not a "disqualified person" they may be able to get the loan(if they are financially strong enough to qualify) and sign personally to guarantee the loan—you will not sign personally. However you may still be responsible for UBIT.

The second option, if the other person is not a “disqualified person” is to let the third party borrow the money from you and a traditional bank using the timber/contract as collateral-this may also avoid UBIT. Many clients will add a clause for a share of the profit, as well as a guaranteed interest rate.

Disqualified persons include family ascendants and descendants ,spouse, parents, children, business partners, fiduciaries, etc—reference IRS publication 590 A&B as well as IRC 4975.

Thank you

Carl