All Forum Posts by: Matthew Will

Mat ...Your timing is perfect. I am right now completing the W-9. I really appreciate the information. 

BTW - I bought your book and it has proved priceless. By getting the Kindle version I can easily word search. I am a finance professor, who teaches alternatives (PE, Hedge, etc.) and the checkbook IRA world is now becoming part of the curriculum. Thanks for helping educate the public about this valuable vehicle.

Tim...Great lead. I listened to the podcast and it led me to another source and a solution. Answer is ....

As Jeff pointed out, the custodian EIN is what should be used (I confirmed via many sources) when required to list an EIN for the IRA itself. Some brokers, however, do not realize this and send the custodian taxable income or withhold taxes from accounts, requiring the filing of a 990-t to get the money back.

What I learned is that some brokers are smarter than others. On the two extremes, Schwab, my preferred broker, has no idea how to handle IRA LLCs or alternatives in IRAs, which is why I stumbled across the Checkbook IRA world when getting ready for my next PE investment. On the other end is TD Ameritrade, that has an explicit account for IRA LLCs. While I prefer Schwab for many reasons, it looks like TD will be getting my business on this investment.

Jeff. Thanks for the info. That is what I have found as well and have been told the same by my CPA.  My custodian says they have had issues with IRS reports saying the custodian owes taxes due and it is always administrative gymnastics to get it fixed. Thus, I suspect they are overly concerned. Since there will be no W9 or UBI in my case, it should not be an issue. 

If anyone else has same or different opinion, please weigh in. More specifically, do most people use the custodian EIN when forms ask for the SSN/EIN of the IRA?

LOL. That I know and am getting. But, this forum offers an additional opinion. And my experience is these folks know more than most locals I deal with. 

Opinions still appreciated. 

I have created a Checkbook IRA LLC.

I have formed a Single Member LLC (SMLLC) with the sole member being the CUSTODIAN FBO ME IRA. The SMLLC has a checkbook and EIN. My goal is to invest in Private Equity through the SMLLC. Until all capital is called I desire that my SMLLC invest in mutual funds and need to set up a brokerage account.

Some brokerage firms will not allow me to create an account if the beneficial owner is my IRA. Those that will, require me to enter the SSN/EIN of the Single Member (i.e. CUSTODIAN FBO ME IRA) and I do not have one.

My custodian advises me to obtain an EIN for CUSTODIAN FBO ME IRA and not use my personal SSN. The IRS website says ” An individual retirement arrangement, or IRA, is a personal savings plan that allows you to set aside money for retirement, while offering you tax advantages. The IRS will only issue an EIN for an IRA trust account if the individual intends to file Form 990-T (Exempt Organization Business Income Tax Return) or Form 1041 (U.S. Income Tax Return for Estates and Trusts).”

Questions

1. Do you concur that my IRA (CUSTODIAN FBO ME IRA) needs an EIN?
2. If yes, do I need to file a tax form each year for CUSTODIAN FBO ME IRA as indicated on the IRS website?

3. If yes, which form do I file?

4. Am I correct to assume I must still file the form even since there will not no income tax due?

I misspoke. Sorry. After re-reading, I see where i erred. 

I, personally, am NOT an LP of the PE Fund and have not invested in it. I do not plan to. I am neither an employee nor getting any other benefit from the PE Fund. 

My retirement SDIRLLC will invest in the PE Fund. I assume that makes the SDIRALLC a LP in the PE Fund. Now the question about my son makes more sense. 

If I invest as a LP in a PE Fund, in which I am a minority partner (less than 5%) and my son ends up working for the GP at some later date as an entry level analyst, does the investment become prohibited? If yes, how do I handle this? 

Also, if yes, how far down the corporate food chain does the prohibition exist if my son works as an Investment Banking analyst for a company used by the GP or works for a division of the GP's firm or a division of the IB's firm?

My first question is the most important, but I am hoping my son is not required to switch careers as a result of how the law is interpreted. In Sorenson's book (Ch 6) he mentions this is the one area where there is some mixed messages from the courts. 

Brain ... You are correct. The investment is now winding down and is in the distribution phase. Since it may take a few years to fully payout, the high fees charged by the traditional broker to simply hold an asset makes me cringe. 

One of my IRAs is housed at a traditional broker and is invested in a Private Equity Fund. This was before I knew of self directed IRAs. I now have established a Checkbook IRA (SDIRA LLC) which owns shares of a different PE Fund. May I direct my existing IRA, housed at the broker, to sell the PE Fund to my SDIRA LLC? Obviously, I'd prefer to have it housed in my SDIRA LLC.