Real Estate IRA: How to do partial distributions?

Question

I have been studying the Real Estate IRA concept for some time, have a pretty good understanding of how it works and its rules, and am getting ready to buy our first investment property with it, a single-family house.

Our goal is to buy a place we may eventually live in after retirement age. I understand we can divide up the distribution of the property across several years to avoid getting hit with a big tax bill in a high bracket all at once. One custodian I talked with said this is routine, and is handled through a quitclaim deed done by an attorney addressing the portion of the property that was distributed each year. Sounds reasonable, although some of the nomenclature (quit-claim deed, for instance) eludes me.

So now I am concerned about the real estate transfer tax, specifically in Florida. I am hoping I pay only the portion of that tax reflected in that year's distribution. Either that or I pay it all once the property has been distributed 100%. I just want to avoid paying the transfer tax on the full property value every year for several years.

I apologize for the long and complicated post, and hope someone can shed some light on this for me.

Thanks!

David

Casey Johnson · Answer

If i use a private lender who uses a SDIRA and i find a great foreclosure through an auction, Can i get some  examples  on how we could put together some terms for the private investor with the SDIRA?

David B. · Answer

Thanks for your reply, Doreen.

This makes sense. I just wanted to make sure I wasn't going to get hit with the same tax multiple times.

David

Doreen Chaisson · Answer

A transfer tax is applies to the SALE of a property in most, if not all states/counties.  A retitling of a property (with no cash exchanged) should not trigger a transfer tax. If, in your state it DOES apply to retitling, it would be tied to the dollar value of the portion of the property being transferred (aka distributed from your IRA), so you won't be paying on 100% value of the property each year, only the portion you distribute.  Some states and/or counties have exemptions to this transfer tax; check with your local registry of deeds to see if conveyance of IRA-owned property to you personally would trigger a transfer tax, and check to see if this transaction qualifies for an an exemption.

It's important to note that you or any disqualified parties cannot make any use of the property until it is distributed 100% out of the IRA.