All Forum Posts by: Rajeev Kotyan

@Ronald Lambert: I agree with @Brian Eastman on this... this is a subjective matter, which is based on both intent and actual.. If there is intent and even if have not done a as many fix and flips, then UBIT may apply. But if there is an actual fix and flip model (i.e. you have done many during the year), then UBIT probably will apply. But then UBIT may not apply on rental component of the income. Please work with an experienced and knowledgeable professional in this space to get it right.

@Jay G.: Your IRA cannot buy the real estate that you currently own, even in an auction... that is a prohibited transaction... outright and clearly...

@Jordan Schlick: You should let them know that 25 business days is the longest they have to process a transfer request as per the banking regulations (assuming that the documentation is accurate). [PS: I do not have the actual banking regulation handy]. But then MidAltantic is not a financial institution (they are just an administrator) and they use a custodian for your IRA.. so you may be out of luck unless you call the actual custodian and inform them about the issue.

@Mark Nolan: Throwing a list of code is not helpful to anybody.. if there is a specific section you want us to read.. please identify it...

@Jeff Vranek: Completely agreed: Gray area is not a good idea...

@John Roberts: If you are hell bent on doing it, find a ERISA attorney who would be able to stand behind it... else stay away from this scenario.

@Ronald Lambert: (1) Great and good stuff...

(2) You have not mentioned whether the IRA is a member of the LLC... if it is then what I mentioned in my earlier post applies.. if it is not.. then ignore my earlier post...

Your W-2 job has no impact to the LLC or the IRA (except if your W-2 employer needs to know -- such as if you work in the Financial Services industry - like myself, or you work for one of those three letter government agency)

@Account Closed: There is no harm in investing from an Inherited IRA by private lending.. assuming you are the one educating the lender, then you do have to be aware that the lenders IRA is an inherited IRA and could be subject to RMD, so make sure to pay the interest on time so that come time to make the required minimum distributions there is adequate cash on hand for the account owner.

@John Roberts: This is very gray transaction.. if you actually break the transaction apart (i.e. the sale of the property and the issuance of a loan) and have them as truly two distinct and separate transactions unrelated to each other, then you can do it. 

So lets say you sell property personally for all cash and the transaction is closed... Two days later your IRA lends money to the now owner of the property, then that is acceptable so long as there is no linkage between first closing and second closing.

But if you attempt to do it as seller financed and then refinance that is prohibited.

This is a very gray area, so for all practical purposes, I would go with @Dmitriy Fomichenko and call it prohibited, and only let a professional who truly understands what they are doing handle it for you.

@Ronald Lambert: What you are doing is completely acceptable... within the IRA... @Mark Nolan, there is nothing that states that an IRA cannot be invested in an Operating Business. It can be.

As you have not provided specifics of your structure, based on the information provided, I will guess that the IRA is a member of an LLC along with other investors. The LLC acquires the notes, and then goes through the loss mitigation process to acquire the property. Once acquired, rehabbed and sold or held for rental can cause the LLC to be viewed from a tax perspective as either an "operating company" or a "real estate operating company". While the "real estate operating company" definition is very clear, that the intent is for purchase (does not state how) and holding and managing real estate, then the IRA is automatically exempt from taxation (Unrelated Business Taxable Income - UBTI). If the LLC does not fall in that exemption, then the LLC will be deemed as an operating company and the IRA as member of the LLC will be subject to taxation (UBTI).

This is not a "check the box" option, it is subjective based on the work actually carried out and documented by the LLC.

Assuming another scenario, where the LLC simply buys and sells the notes, then as per the definition, the LLC actually gets deemed as an operating company, wherein the gains may be taxable to the IRA, but the interest received from the notes may not be taxable.

You have already mentioned that no disqualified party involved... so nothing to add here.

Hope this helps.

@Yohannes Kifle: The general rule of thumb with rollovers and transfers,,, From any employer sponsored plan 401K 403B, 457, etc... in order to move the monies from one employer plan to another or to an IRA, the funds are pushed out from where they currently are once the receiving account is opened, so you have to follow the documentation and forms of the sending employer plan.

For a transfer from an IRA to another IRA or employer sponsored plan, the funds are generally pulled into the receiving IRA or employer sponsored plan, so you would have to follow the document and forms of the receiving custodian or employer sponsored plan.

This is a general rule of thumb to follow... this may not benefit you now, but maybe for your future.

@Ewan Tong: In MA when filing an LLC with the Secretary of State, there is a section for naming the persons who are authorized to execute, file and record documents as it pertains to the LLC and to any real property associated with the LLC. If this is left blank, then it is automatically assumed, that it is the Managers filed in the LLC filings..