Passive Apartment Investments in SDIRA

[Joe Harden]

I recently made a number of investments as a limited partner in several different apartment syndications. All of these investments are currently in a traditional self-directed IRA. My plan is to allow these to grow and keep rolling the proceeds into more syndications.

I'm currently looking at the following options, two of which involve paying taxes up-front:

1. Withdraw the investments from the IRA. Pay the taxes. Use depreciation to offset the future gains. (My concern here is that there will be enough depreciation to cover the gains.)

2. Do a Roth Conversion, pay the taxes, and deal with UDFI/UBIT, custodian fees, and tax complications. (I'm estimating that this will cost me ~2% of the IRR, but this would give me the flexibility somewhere down the road to switch to different investment class in the Roth and have it be tax-free.)

3. Leave them in the traditional IRA and invest the cash that would have gone to pay the taxes for Options 1 or 2.

Does anyone have any recommendations on choosing between these options?