Completely Ignorant to Strategies of Deferring Taxes

[Marquest Page]

Hello BP,

I am in need of any advice that can be given regarding spending less money from my proceeds to the IRS. I have a double closing scheduled just before the new year. I would rather not see my profits taken so I am trying to figure out methods to reduce the loss from Uncle Sam. I had a friend of mine suggest that I should open either a Self Directed IRA or Self Directed Solo 401k and place the funds that I would have needed to pay the IRS into the IRA or 401k. This would defer me paying the taxes until I pull the money out and while the tax amounts sit there they accrue interest which brings more profits vs just paying it upfront with no gain. Due to my friend not being a CPA I just wanted to get other's opinions on this strategy and any other suggestions you guys may have. Thanks in advance.

[Michael Plaks]

@Marquest Page

Retirement account cannot help you reduce taxes when you're wholesaling to pay your bills. Until you make enough to pay your bills and still have profits left. Those extra profits can be channeled into a retirement account.

Your friend is talking about doing deals inside self-directed IRA. In other words, your IRA/401k is acting as an investor, not you. And since your IRA/401k is the investor, profits go to the retirement account, not to you. You cannot use that money.

His strategy is great, but not suitable for you, I believe. Of course, I'd need to learn more about your situation before giving specific advice.

Free consultations are usually offered by newer accountants who have more time than clients. In my firm, for example, my staff can give you a short free consultation, but my personal time is not available for free. Each firm has its own policy, of course.