SD-IRA Tax Handling for Investing in Single-Member LLC

[Robert Borer]

Greeting BP RE tax gurus:

I've received a notice from my SD-IRA custodian to report the fair market value of my "investment".

I invested in a Single-Member LLC, of which I am the "Single-Member". The single-member LLC was created with a bank account with a starting balance. The LLC is nothing more than a vessel to hold my real estate funds within and doesn't provide any services or sell any products or actually generate any revenue. I've essentially used this LLC as a way to pay for real estate-related expenses.

I have two questions related to this.

First - would the "Fair Market Value" in this situation literally be the balance in the bank account for this LLC?

Second - Is there an ideal strategy for what that bank account balance should be at the end of the year?  Would there be a tax consequence if the balance at the end of the year was greater than the starting balance? Lower than the starting balance?  If so, what should I anticipate for taxes?

Thanks for your insights