Self directed IRA question and scenario

[James Frank]

Hi all,

New to the forum but I have been reading up for a while now, I finally registered. I have been talking with an attorney, some investors and a company that can set up self directed IRAs.

Here is my scenario:

Goal- to form an LLC which would purchase, renovate and resell SFR's in California.

Investors and LLC memebers- My Dad (using IRA funds)

My Uncle (using IRA funds)

Personal Friend (using non IRA funds)

I would own a percentage of the LLC as the operator and would be the managing member.

I understand that my dads IRA funds directly benefiting me would be a prohibited transaction. I was doing more research and when I spoke with a lady at the firm which sets up self directed IRA accounts she said as long as the LLC was formed at the time of the Self directed IRA and the percentages never changed that this was not considered a prohibited transaction.

So my question is, if this is true. Does this scenario work. 1) My dad and uncle create self directed IRA accounts 2) The LLC is formed. 3) My dad and Uncle and personal friend then all send in funds to the LLC's bank.

4) Operations begin. 5)The distributions of profits would go quarterly to the two self directed IRA's, my personal account and my friends account.

If the percentages of ever changed this LLC would have to be dissolved in order to not be considered a prohibited transaction?

Would my Dad or Uncles Self Directed IRA be in risk of UBIT tax under this scenario?

I am done a little research on all of these subjects, but am far from an expert. Advice and guidance is greatly appreciated.

James.