All Forum Posts by: Robert Caverly

@Brian Eastman I see. I was not aware that by pledging an IRA as collateral for a loan, the IRS would consider it income and it would be taxed as such in addition to the early withdrawal penalty. However, it looks like 401(k)'s can be pledged as collateral? Is this true?

Thank you for your advice!

Interesting, not something I had heard of before. It looks like the ability to earn a management fee is a legal grey area, and a loophole in the legislation that the IRS may or may not be cracking down on. In your opinion, is this a significant risk? And is there a limit to the management fee? Or could someone conceivably pay themselves a 50% management fee if they wanted to? 

Here is the specific quote I am referencing: 

IRA law prohibits the IRA owner from providing services to his/her IRA and its' owned assets. The exact definition of what "providing a service" looks like is vague in IRS code, which means courts could interpret the definition of this very strictly to include management and accounting services for an IRA. Such a ruling could put the status of Checkbook IRAs in jeopardy and potentially result in substantial taxes and penalties for the IRA owner.

I work for a Hard Money Lender, and had a client ask once how he might be able to leverage an SDIRA to create more liquidity. He was using the funds to invest in real estate, but wanted a way to keep at least a portion of his profits, rather than being required to return all profits back to the account until retirement. My solution was to lend against a new investment property that he would like to acquire, and the SDIRA as additional collateral. I figure we can lend against 60% of the account value, after accounting for fees and penalties that would be incurred if a withdrawal were necessary. I believe if the deal is structured this way, the borrower would not be required to reinvest profits back into the SDIRA. I'm curious what everyone's thoughts are on this, and if there is any demand for this sort of structure if we were an option? 

Thanks in advance!