IRA strategy - checkbook control, flips, then 72t?

[Jim Goebel]

We had a conversation with our CPA today and in the course of that a few 'new' ideas came up.

I'm wondering for those that have utilized checkbook control for a business under a self directed IRA, then for instance done a flip, within an IRA -

The CPA walked us through tax obligations for a flip, in the 'outside IRA' world, and it isn't pretty. Seems after the gains tax and then the self employment tax we were up nearly at 45+ % !!!

I'm nearly certain people that flip properties do much better, but here's what crossed my mind:

Why not get checkbook control, flip something within the IRA, then do a 72t to start drawing income early out of the IRA which let's you not have the early withdrawal penalty? The main advantage as I see it would be then that the income is taxed at your marginal income rate which will depend on where someone is, but is much lower than that 45% etc.

Am I missing something?  I doubt we'd get into this world as at least as of now, we're mostly doing buy and holds.

On a somewhat related note, as well - I'm wondering if there's some way to do a 72-t from income (ie an existing cash flow) within a self directed IRA? Instead of withdrawing from a cash balance? Meaning, if there's an existing cash flow (say rental income) that can be counted on, can a 72t be done there?

[Steven Hamilton II]

72T is not terrible; however, there are requirement to be met. In addition to that you have to look at the possibility of UBIT if you continue to flip. You cannot do anything to benefit your IRA personally nor can it benefit you either. So you must be very careful or you could be running even higher rates.

Now, I'm not familiar with your situation; however, I think that 45% might be rather off if your personal income includes wages to get you to the 30% area. Possibly between Fed and State; however, you are probably capped at the Social Security Max. Keep in mind the QBI deduction would give you 10% assuming you qualify.