All Forum Posts by: Gene Mitchell

I am NOT an expert, but it would seem to me to be treading very close to a prohibited transaction.  Is it worth the risk of having your entire SDIRA  disallowed? 

remember your LLC is not a taxable entity as far as the IRS is concerned. Everything flows through to your individual situation. The LLC's purpose is a liability protection, not tax protection. As far as someone helping you with structuring the LLC for tax purposes, I don't see a reason for that. Whether you use an LLC or not is up for debate. I personally feel that it is worth it to further insulate me from liability. Nothing is foolproof, however, so carry a good umbrella policy -

Since an LLC is a pass thru entity as far as the IRS is concerned, I would say no, there are no tax implications.

as Wayne mentioned, you depreciate the value of your property, excluding the land value, over 27.5 years. You also must capitalize and depreciate any improvements to the property, such as a new roof, landscaping, remodeling, etc as they are incurred. So it is important to keep track of the cost and date of the improvements so your accountant can figure out the amount to depreciate. I use Turbo Tax, which can figure it out for me. 

When you sell the property, you must recapture the depreciation  for tax purposes to determine  the capital gain that you will pay tax on. But it is generally considered better to pay tax at the capital gain rate than at the ordinary  income rate  had you not taken the depreciation. You also give yourself the option to avoid paying any capital gains by using a 1031 exchange, buying another property and rolling those gains in it, but that's another subject! 

Hope that helps you understand it better. 

personally, I used LLCs and umbrella policies. Both are cheap. I have set up  three separate LLCs, and never spent more than about $350 on any of them. That's one more piece of cheap liability insurance as far as I'm concerned.  having been involved in a frivolous lawsuit, I can say from personal experience that your liability is only part of the issue.  the months of proceedings dragging on and stress filled,  sleepless nights, is not worth it. Anything I can do to discourage a lawsuit against my business I will do. in my opinion, the more barriers put up to a lawyer the less likely they will take a case. can they pierce the corporate veil? Of course they can, but any lawyer is not going to take something like that on without a retainer from the client. That, in my opinion, discourages people from filing lawsuits unless they want to put up their own money to see it through.

Robert, the irs disregards the LLC for tax purposes. Everything flows thru it to the LLC owner, which I assume is you. Therefore there is no tax event from changing the deed. But, since I am not an account or tax lawyer, you should seek clarification from one.

you don't "sell the property back to yourself". You simply execute a warranty deed and put it back into your name. I have done this several times with my properties for refinancing purposes. 

You can either transfer the money to your LLC and then purchase it thru the LLC or you could purchase it yourself and then deed it into the LLC. There seems to be two schools of thought on LLCs vs keeping the property in your name. Personally, I put my properties into the LLC. Others choose to forego an LLC and just carry a large umbrella liability insurance policy. My feeling is that I want to place as many layers between my personal assets and a potential lawsuit, so I opt for the LLC route. I also have a umbrella liability policy. In my opinion, the more difficult it is to get to my personal assets in a lawsuit, the less likely a lawyer is to pursue it.

Bob, you can purchase real estate thru your sdira using cash or by financing, but if you finance, you will be subject to tax for the portion of profits derived from any financing. Thus, it is usually not something you would want to do if you can purchase with cash. 

I was told by my sdira advisor not  to apply for a credit card, but I can't remember why they said that. I use a check or debit card.