Self Directed IRA Tax reporting?

[Frank M.]

For my current rental property, I file a Schedule E each year. And I have to track all expenses and income to do so.

Once I set up and fund an SDIRA via transfer from a regular IRA, what are the reporting requirements? When I buy and sell stocks now, there's nothing, the gains stay in the account, and it's only withdrawals I'll be paying tax on. Is it the same with the SDIRA, one time paperwork, and then only report withdrawals, or is it more complex than this?

[Loren Whitney]

@Frank M.

Hi Frank!

Your IRA provider will file form 5498 with the IRS to report the anual valuation and any contributions/rollovers. One thing to prepare for is a FMV (Fair Market Valuation) submission to your future IRA provider. Since real estate values is subjective, you'll need ot provide a manually prepared valuation so that your IRA provider can supply the IRS would accurate figures. Most providers aren't requiring full appraisals yet but FMV requirements are tighening up industry wide. There are no additional reporting requirements from your end IF you're purchasing a property for cash.

If you decide to leverage your IRA on the otherhand and take out a non-recourse mortgage, you'll need to file a 990-T form and pay any resulting taxes from the IRA balance. Think of the 990-T as your IRA's personal tax return. Any UBIT taxes are paid by the IRA, not it's holder.