SDIRA UDFI tax question

[Donald S.]

Hi all. If I open a SDIRA rolled over from my TSP, about 66% traditional and 34% Roth if that matters, what tax hit am I looking at if I use the money to purchase by and hold rentals, using debt financing?

For easy numbers lets say I buy a property for 100k, with 25k from the SDIRA. How much of a tax hit is it? 

Also, if I PM the property with my PM LLC I already have setup, can the SDIRA pay me a PM fee, or is that a related transaction?

Thanks 

Cheers!

[Brian Eastman]

@Donald S.

You have several issues with your strategy and I would suggest you speak with a professional.

Firstly, non-recourse loans will typically require more like 35-40% down and 10-15% in reserves.

Combining tax-deferred and Roth funds can be done, but can get structurally complex.

UDFI taxation applies on the percentage of income derived from the borrowed capital.  So, with a property that is 60% debt-financed; 60% of the gross income is looked at by the tax and you then apply 60% of normal deductions like deprecation, interest on the note, etc. Most financed properties of around $100K would be likely to produce about $100-200 in tax liability for a year.