All Forum Posts by: Dmitriy Fomichenko

@John Paul, it's time to graduate from "old school" and start living in the 21st century for your own benefit. You can get the cashier's check and do any other banking transactions from the convenience of your home office or mobile device without ever going to the branch with any of these banks. 

@Neil Smith,

Yes, Traditional IRA can be rolled into Solo 401K.

Not possible! IRA funds can be used to make investments only; they can't be used to buy a residence. You can take a distribution from the IRA, pay the taxes (plus penalties for premature distributions), and then use the funds as you see fit. However, you cannot use IRA funds directly in the transaction you are describing.

You can convert it into a self-directed IRA and buy investment property with it. You are prohibited from using the property personally; it must be a rental. You can't rent it to family members either. You can't do any work on the property yourself, you must outsource everything. You can finance the purchase of an investment property in an IRA, but you must use a non-recourse loan, which typically requires a 30-40% down payment. Leverage in an IRA will produce Unrelated Debt Financed Income (UDFI), subject to Unrelated Business Income Tax (UBIT).

There are plenty of investment options to deploy your IRA funds, but again, using your IRA in connection with this transaction will disqualify your IRA.

@Barrie Hasselbalch,

If the IRA custodian closed his IRA, they don't have his money. You indicated that his IRA owned an interest in some LLCs. When Vintage IRA resigned as his IRA custodian and he did not move the assets to another IRA, this means that these assets are now his personal assets. The distribution had to be reported on this tax return, and taxes and penalties had to be paid. He might have to go back and amend tax returns for those years. Based on your description, it does not appear to be a wrongful distribution. When he opened an account with an IRA custodian, he had certain responsibilities, such as paying annual custodian fees and reporting the values of the assets the IRA owned annually. If he failed to do so, he breached the agreement, and as a result, his IRA was closed. I agree with @Chris Seveney that he doesn't have any chance of fixing anything with a custodian and needs to focus on making sure tax returns are correct and assets are moved to his personal name. 

This is not tax or legal advice; engage those professionals. 

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@Tanya Maslach,

When you take a distribution from an IRA, you are subject to ordinary income tax, plus penalties, if you do it before reaching retirement age.

Alternatively, you can convert your IRA into a "Self-Directed " IRA and buy investment real estate inside your SD IRA. Remember that you would not be investing personally but rather your IRA, which is a separate legal entity. All investment income must go back to the IRA, and all investment-related investments must be paid from the IRA. Generally, all passive income in an IRA would be sheltered from taxes, however if you are using leverage then portion of the income derived from the financed portion of the property would be subject to Unrelated Business Income Tax (or UBIT). IRA would be responsible for paying this tax.

This is inaccurate. You don't lose the ability to claim depreciation deduction because you are not the investor; the IRA is!

If I invested in MF investment - you would not expect to take a depreciation deduction from my investment, would you? We are two different people. The same applies to an IRA. An IRA is a separate legal entity, different from you.

@Yi Chu,

Another important factor you need to understand is that when an IRA is invested in leveraged real estate (most MF deals are), the portion of the income derived from the leveraged portion of the property will be subject to Unrelated Business Income Tax (or UBIT), which can be offset by using depreciation and other deductions. Be sure to consult with an experienced tax expert so you understand the tax consequences. 

@Yi Chu,

The key here is that it is not "you" who is investing in the multifamily deal but rather a Roth IRA; therefore, you can not claim any tax benefits personally. You don't lose anything because you personally did not invest. You are trying to compare oranges and potatoes, this is not appropriate here. A Roth IRA is a separate legal entity, different from you.

@Ned Carey,

A solo 401k is not subject to UBIT on leveraged real estate only. However, if the 401k has business income, it will be subject to UBIT.

An IRA is not subject to capital gain taxes because it is a tax-deferred retirement plan. However, if the property is sold while financed (there is a loan on it), a portion of the gains will be subject to UBIT.

Taxes is not my area of expertise so I suggest readers consult with their own tax advisor on this subject.