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Self-Directed IRA Rules – Indirect Benefit

Investing in a Self-Directed IRA is a great alternative to investing in traditional investments such as stocks, bonds, and mutual funds. Through a Self-Directed IRA, you can invest in more non-traditional investments such as real estate, private placements, gold and silver, loans, and other hard assets. Many individuals shy away from investing in Self-Directed IRAs […]

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ROLL YOUR 401(k) OVER TO AN IRA

You don’t have to leave your 401(k) or other employer retirement plan money in an existing plan if you no longer work for that employer. The same rule applies to an inherited 401(k) or employer retirement plan. Whether it’s your plan or it’s inherited, you can legally and advantageously move those funds into an IRA […]

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Self Directed IRA – Unrelated Debt Finance Income (UDFI)

A subset of UBIT is the Unrelated Debt-Financed Income (UDFI) tax. Under IRC § 514, the IRS will assess a tax on any income that is derived from the use of “acquisition indebtedness” in passive Self Directed IRA investments. For example, if your Self Directed IRA uses $30,000 of its own funds and also borrows […]

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Top 10 Self Directed IRA/401k Mistakes – #7 IRA owner uses personal assets or “Sweat Equity” for the benefit of the IRA

A self directed IRA owner is clearly allowed to guide and manage the investments of the self directed IRA. The management can be relatively involved and substantial. As an example, the self directed IRA owner (or even the self directed IRA LLC manager – the account owner), could potentially expend considerable effort in finding the […]

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Top 10 Self Directed IRA/401k Mistakes – #6 Two or more IRA owners agree to “loan” each other money to avoid prohibited transactions

Interacting with your IRA is considered a prohibited transaction. So, unrelated, self directed IRA owners will attempt to enter into a reciprocal agreement to loan each others self directed IRA money so that the IRA owners can indirectly tap their funds for personal use. This is a flawed design and approach. Even though the parties […]

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Top 10 Self Directed IRA/401k Mistakes – #3 – Active Business Investment Is Not Subject To UBTI

Unrelated Business Taxable Income (UBTI) is generated when an Self Directed IRA engages in active business.  A business activity would be one in which the business is buying and/or selling goods and services. A good example would be if you purchased interest in a restaurant , oil and gas exploration, or even a apartment complex. […]

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Top 10 Self Directed IRA/401k Mistakes – #2 – Making Contribution To The IRA LLC

The Self Directed IRA owner makes their annual contribution directly into the bank account of the LLC rather than with the custodian of the  Self Directed IRA. In this case, you are personally interacting with your ICO (IRA-LLC).  That is considered a prohibited transaction. Additionally, an IRA contribution is only considered valid when it has […]

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Top 10 Self Directed IRA/401k Mistakes – #1 – Making A Personal Guarantee

The IRA account owner is considered a “disqualified person” and cannot provide a personal guarantee of a loan for the IRA. Therefore, when setting up an IRA or IRA-LLC (ICO), you cannot guarantee a loan to purchase property, nor could you open a margin account at a brokerage firm in which you personally guarantee to […]

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