Checkbook IRAs and Some Syndication Investments at Risk

[Alan Johnson]

I visit BP infrequently and am surprised that nothing seems to have been posted about changes the House Ways and Means Committee are introducing to help reconcile the $3.5 trillion spending bill. Two sections in particular (Sec. 138312 and 138314), if enacted into legislation, will have significant and, for some, devastating impact on their IRA accounts.

Sec. 138312 prohibits an IRA from investing in a private offering that requires accreditation.

Sec. 138314 prohibits an IRA from investing in an entity in which the account holder is an officer. This effectively prohibits checkbook IRAs.

If such investments are held beyond December 31, 2023, then the entire IRA account will be deemed to have been distributed.

See https://waysandmeans.house.gov..., then follow the link at the bottom of the page for specific language for each section above.

Many SDIRA custodians are encouraging their clients to write to their representatives on this issue.  Some offer assistance in the way of example letters and templates.

At the least, I suggest that those of you that would be impacted by these changes contact your custodian to see what actions, if any, they are taking and recommending.

[Ned Carey]

@Mike Dymski @Greg O'Brien the answer to that one is the cap they are considering. I think it is something like over $10 million in IRAs then no more contributions, something like that anyway.

Going by Mike's theory it makes more sense to put a cap on the total amount that can be sheltered that it does to limit the choice investment options. A cap alleviates the need for limiting the choices. 

Of course the cap should be indexed for inflation. 10 or 20 years from now a 10million cap may not seem like much.