All Forum Posts by: Brett Synicky

 As @Michael Plaks recommended there are lots of threads on BP discussing this. Depending on what your investing goals are you want to looking into self directed IRA vs. checkbook IRA or even better if you qualify Solo 401k. The pitfalls really revolve around prohibited transactions and disqualified parties. Stay arms length and nothing to worry about. 

There are a couple of types of SDIRAs. SDIRAs where you go through the custodian for all transactions and they're on title to all assets FBO your IRA. Depending on the fee schedule and activity this can cost significant transaction fees and always includes some red tape and extra processes to go through. If you're only doing a couple or so transactions per year probably ok.

On the other hand, you can have more control and eliminate the need to go through a custodian for investments by the use of checkbook IRA or Solo 401k. If you get a loan it must be non-recourse and will require about 30-50% down. See list of lenders here. If you have an IRA LLC the custodian is not involved in the IRA obtaining financing including a refi. You're the manager of the LLC of which the IRA is the only member so you control that.

Whether you have checkbook control or not, the rollover will go from custodian to custodian so you'll work with both to process the rollover. As the manager of the LLC, you can open a checking account where the funds rolled from your 401k. will land. The checking account can act as the home for the funds until you deploy the money into and investment, then all expenses and returns flow from and into that checking account that you control.

It may sound complicated but it's really not once it's all set up. Hope this helps.

There may be a better way to get more in Roth. You can make straight Roth contributions or convert cash as you’re talking about but you can also convert assets from pre-tax to Roth. If you have a self directed account and invest pre-tax money into illiquid assets like syndication or mortgage notes they will come in at a value of less than the principal. Sometimes significantly less. Like 60%. So more Roth for way less in taxable income incurred. 
doing this is easiest in a Solo 401k if you qualify but can also be done using a checkbook IRA as well. 

check out this post that @Dmitriy Fomichenko made explaining this concept.

https://www.biggerpockets.com/forums/51/topics/1223601-how-t...

@Todd Knudson is there a loan on the property? That is the only way you can deduct some expenses and use depreciation within the IRA. None of this has anything to do with your personal tax return. Work with a qualified tax advisor on filing all of this including filing the 990T return for the IRA. If the IRA owns the property outright that is all moot. Yes all losses and returns the IRA incurs stay in the IRA until you take a distribution.

So you rolled the property from one retirement account into another, right? It's unclear on how that plays into your question about taxes. Are we missing something? What @Dmitriy Fomichenko and @Matt Devincenzo said are correct. 

 Here's a list of non-recourse lenders: 

https://www.biggerpockets.com/member-blogs/2810/50272-list-of-non-recourse-lenders-for-self-directged-ira-and-401k

@Tim Brinsek That is correct. See Dmitriy's comment about UBIT above as he explains it well.

@Eric E.UBIT only comes into play in an IRA on leveraged real estate and running an active business. Investing in a fund like PPR has no UBIT implications unless the IRA is an LP in a syndication but I don't think that's what PPR does.

 Many people invest in real estate using an SDIRA or even better a Checkbook IRA. Yes it will have UBIT on the portion of the income pro rata to the mortgage. It scales up to 37% once you get to around $12k of income but the UBIT is calculated after the first $1000 is deducted along with expenses and depreciation again only on the same % the property is mortgaged. Many opt for other investing methods in their SDIRA like private lending, crypto, private equity...anything except collectibles and life insurance.

Note that a Solo 401k is exempt from UBIT on leveraged real estate so if you have self employment activity and no full time employees save for you and your spouse you should consider the Solo K as an option. 

Bonus if you do any of this in a Roth account. It's not hard to understand the disqualified party rules and prohibited transactions. 

It seems that often when companies acquire large books of business in one shot there are growing pains and unfortunately those are felt at the client level. I would encourage anybody with an SDIRA to consider switching over to a Checkbook IRA for some of the following reasons:

1. Eliminate transaction fees

2. Eliminate the red tape of going through a custodian for all transactions/investments

3. Invest in as long as it takes you to write a check, do a wire transfer, or even an online bill pay

4. All investments and assets are in the name of the special purpose LLC instead of "name of custodian FBO Jim Bob's IRA".

5. In the event of an acquisition your "Checkbook Control" set up would not change. The challenges experienced in the cases mentioned above and elsewhere would be non-existent. Customer service from a support perspective matters of course, but no hang up or delays on investing would take place.