All Forum Posts by: Russ Sandifer

I really appreciate the feedback I've received here, especially to stay clear of any gray areas with the IRA. At this point, I'm planning to move forward with just purchasing the property outright with the IRA and then managing income and expenses via a checkbook control IRA LLC for convenience (especially for the convenience of my property manager who typically handles deposits and expenses for me). I don't see how I would be able to secure non-recourse debt financing prior to closing but wondered if it's possible to do so after closing? (I get that being in a 100% cash position leaves some upside on the table but the investment has a solid return without leverage and is an emotional win as-is). If this investment has a downside, it's that it is in this Roth IRA and yet is not my most efficient investment in my portfolio. If I could restructure and bring properties from my business LLC into this Roth IRA and then buy this duplex with my business, that would be ideal but it does not seem that is allowed. Which is unfortunate.

@Daniel Dietz @Carl Fischer Would appreciate any recommendations on non-recourse loan possibilities. Thank you both.

@Dmitriy Fomichenko and @Brian Eastman Thank you both for your guidance to help steer me and others on here clear of any self-dealing. That is certainly my goal in asking the question. I believe you understood my question well and have spoken thoroughly to it. That said, please indulge me for a couple of follow-up questions.

Brian indicated that a disqualified person cannot be involved in ANY way with the entity purchasing the asset from the plan; however, I wasn't sure if the restriction for sure applies only when the asset being sold is WHOLLY-owned by the IRA. I'm not sure if my original question was clear on the point that the to-be-sold asset would be only partially-owned by the IRA. To me, simply from a pragmatic side of things, it seems that would (or should) matter. So I ask: Does the restriction hold true even in the latter case, namely the case where the asset to be sold is currently owned by MULTIPLE parties, of which the plan is but ONE owner?

I was imagining that such a seller situation (asset owned by multiple parties of which the plan is but one) would be considered sufficient to avoid the prospects of self-dealing between the plan and the for the benefit of (FBO) party on the basis of the following rationale: the other current owner(s) of the asset would have every reason to sell the asset at or above market/appraised value and the other current buyer(s) of the asset would have every reason to purchase the asset at or below market/appraised value, thereby preventing any kind of backdoor retirement plan liquidation advantage for the FBO party since there would be checks and balances against such behavior.

It seems to me that the IRS could help us side-step this whole discussion by explicitly providing for the option of such transactions in cases were such an asset is sold at appraised value, as rendered by a licensed (and qualified) third-party appraisal company, thereby proving that there is no unfair advantage realized by the FBO party vis a vis his or her retirement plan.

In sum, it seems that if the purpose is to keep the fox (FBO party) from guarding the hen house (retirement plan), if the point is to prevent self-dealing, if the point is to prevent the sale of the asset at some below-market value which gives the FBO party a backdoor retirement plan liquidation opportunity, a requirement for the transaction to happen at appraised value would seem to be a perfect check and balance. And I wondered if this concept shows up in any of the interpretative literature?

I have a duplex rental under contract. I plan to close in two weeks. I am set to purchase the duplex outright with my SDIRA. My current custodian is prepared to wire the funds. 

If time allows, I'd like to create a Checkbook Control IRA LLC (let's call it CHECKBOOK LLC for short) for all the reasons cited on various posts on BP concerning the Checkbook Control IRA LLC structure. I am in touch with a couple of companies that provide this service, including a sister company of my current custodian, to see how quickly they can pull this together.

In the meantime, I have been debating whether I want to purchase this duplex outright or not. Since the purchase price, closing costs, and working capital will require most of my custodial account funds (or CHECKBOOK LLC funds). I'm not sure I really want to do that, which leads me to the following...

Since I'm not sure I want to tap out my whole IRA with the purchase of a single rental property, I asked a partner of mine and he said he'd be open to going in 50%/50% on the purchase of the duplex by purchasing it in yet another LLC (an MMLLC that we should call RETIREMENT PARTNERS LLC). He'd bring his 50% in non-qualified cash or via his 401K and I'd bring my 50% via my CHECKBOOK IRA LLC. In this case, my understanding is that CHECKBOOK LLC would be a 50% owner of the RETIREMENT PARTNERS MMLLC (unless there is a reason not to do that). We'd split everything down the middle. My understanding is that my (or, more properly, CHECKBOOK IRA's) half of the rental profit would go back into CHECKBOOK LLC tax-free, irrespective of whether my partner's position is a non-qualified personal position or via his 401K.

Beyond the tax implications, where I am fuzzy is this. And this is my PRIMARY question, given the abovementioned context.. if we later decide we want to keep the rental but want to get the principal out of RETIREMENT PARTNERS LLC to use on other investment, could we sell the property from the RETIREMENT PARTNERS LLC (which has my IRA as 50% owner) to yet another MMLLC called FINAL DESTINATION, LLC where he and I (and maybe others) would be personal owners (i.e. no IRAs involved)? Would the fact that I am personally an owner in FINAL DESTINATION (either majority or minority) owner prevent this sale as a prohibited transaction? I've heard an "expert" say if FINAL DESTINATION is newly created for this purpose, then it's OK. But the language I've read seems to suggest, at best, that I'd have to be a minority owner in FINAL DESTINATION in order for such a transaction to be qualified per IRS guidelines. Thank you.