Sorry for misunderstanding.

@Bryan Devitt Hi Bryan, due to my inexperience, I may be misunderstanding, but are you saying that if you were to hire an outside worker to complete a kitchen remodel, you don't ask them to complete any tax paperwork on the front end?

. - I'm pretty sure you misunderstand how your CPA's audit insurance works.

Good details, but clearly, a tough topic, misunderstanding is easy given the convoluted nature of IRAs, 401(k)s etc, and when the self-directed aspect is added, it only gets worse.It would be great to see a member-driven guide, a complete run down on the rules, and discussion of the comparison between the SDIRA and SD401(k).

There was a misunderstanding regarding the representation from one party to the other, and viola you have a fraud lawsuit. 

I might be mis-understanding you.Of course you need to declare all of your income to stay out of jail.However, rental provide excellent tax shelters AND there are many indirect deductions that you can use as well.

___You are correct that when posting a distribution from a child LLC, it is NOT an expense to the LLC, so you've got the transaction half correct.Your faulty logic comes in a misunderstanding that you are only taxed on the distributions at the parent level.  

@Robert Matelski  I think you are misunderstanding my post. 

A verbal communication should be followed up with a letter to avoid misunderstandings.

You suggesting general ideas given to you on the internet is a great way for a misunderstanding to take place and him to end up screwed.