All Forum Posts by: Ron Read

Sincere thanks, Dmitriy.  

I guess I'll just never understand what a disqualified person is.

First of all, thank you again for replying, Dmitriy.  I promise I'm not trying to be obtuse or challenge you, as I accept that you know way more than I do, and I'm completely ignorant here, but trying to learn from your wisdom. 

I'm still trying to understand *how* the business is a disqualified person, prohibited from transacting with the SDIRA.  The IRS lists out 10 ways to be a disqualified person in the link we both referenced.  Which one applies to this situation?

They also state that "prohibited transactions are transactions between the plan and a disqualified person that are prohibited by law" which makes me believe that if there is no disqualified person in the transaction that it cannot be a prohibited transaction.  Am I missing something here too?

Thanks so much for your patience and taking the time to share your knowledge,

Ron

I certainly get that. If anything my partners will browbeat me for below-market rents. The only reason I'm considering this is because the IRA is the only place I have the cash to make the purchase, and would prefer to not create a penalty and taxable event by withdrawing from my IRA.

I think where I'm lost is that I have not been able to find a reputable source which defines who constitutes a disqualified person for SDIRAs.  There is very clear guidance in tax code for some other plan types, and the threshold is usually 50% equity or fiduciary responsibility for those, both of which we do not have.

The business which rents the space isn't owned by the IRA. It's an existing partnership LLC (restaurant) which I invested in, but my partners operate. Only the commercial real estate would be owned by my SDIRA.

I'm looking to purchase a piece of single-tenant commercial real-estate in my SD-IRA. The single tenant is a business which myself and my wife own a silent 1/3 stake in. Our partners are unrelated third-parties whom control the other 2/3, and manage the business.

Is the business a disqualified person?

Follow-up:  If the answer is no, and at some point in the future an immediate member of my family ends up working for the business as a non-managing employee, does that change things?

I live an hour upstate from you, and just about every real estate attorney I've dealt with is familiar with double-closing, and has had to manage a wholesale deal.  Just call any local firm, and ask if they can manage it.

 Thank you for your reply, Wayne.

I hadn't considered that factor.  In this particular instance, after a year of slashing prices, the seller has actually marked the property down to slightly less than what he paid a decade ago.  His business was grossly mismanaged the building almost went to auction for taxes this month, so I guess the next step is to see if I can get a copy of the returns to a CPA to see if there is any depreciation left, or if he mismanaged those as bad as he did everything else, and left all the meat on the bone.

Thank-you Stanley.

I figured this is the logical next step.  Hoping if there are any gotchas I haven't considered that someone will call them out.

Regards,

Ron