I then asked the date of their last audit by the custodian. 

When properly established and utilized, a self-directed IRA or Solo 401(k) should not have any issues in the event of an IRS audit.  

So, you really need to do your due diligence in finding a mortgage broker/RMLO.Get references, then see if those references have any relationship with the LO,Look to their last state audit and compliance exam, if they never had a compliance exam, move on.Do they have the net worth to buy, at par, any loan they do that is non-compliant?

In general, smaller buildings in NYC are difficult to manage as they entail a slew of services (rent collection, bookkeeping, maintenance visits, tenant disputes, leasing, local law compliance, payroll, insurance, insurance audits, etc.) that aren't cost effective for the owner of a small building, and the fees aren't enticing enough to afford the best talent in property management space.

And if you go ahead and report it as an investment property on Schedule E anyway, and the IRS audits you and finds out it was a personal use property (which it sounds like it is), you had better have some money saved up for penalties and interest. 

I've heard of audit cases from the California Dept of RE to ensure PM's, but yeah, the insurance seems steep so I wouldn't be surprised if they didn't have insurance.All that aside, ridiculous that they're suing both.

Then, when you get audited you find out that the problem is an underlying matter that you failed to disclose (not knowing) when you got assistance and the IRS has no liability in giving you that assistance.

With a nationally recognized CPA firm, annual audits and a reputable fund administrator, you would meet the minimum requirements for many investors.A strong CFO will not only bring financing expertise, but also strong risk management through adequate internal controls.

I think that's going to be a tough sell to the IRS at audit.As for documentation - I've not yet represented anyone at audit where the IRS questioned the date placed in service.

If you are audited, you may be requested to show that you’ve been renting the correct percentage of the new property.