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Top 10 Mistakes People Make with Self Directed IRAs Part 1

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It can be hard sometimes to make sure your doing everything correctly with your self directed IRA. We want to help make sure you do not make the mistakes that are most common. If you have any questions about the following information feel free to contact us.

  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.
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  2. Making an IRA contribution by depositing it directly into the ICO (IRA-LLC) checking account versus directly with the IRA custodian
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  3. IRA owner individually signs an agreement on property they want to buy with their IRA.

    IRA owner attempt to delay setting up the self directed IRA or the LLC until they are on the cusp of getting the property. This usually results in a case where the IRA account owner, personally enters into the buy-sell agreement to acquire the property, and even puts down personal money for the property. The account owner then either sets up the self directed IRA account and/or the LLC that will hold the property.
    This is a very flawed approach. For one, the property must be owned and titled in the name of the IRA account or the LLC. Secondly, you cannot use your personal funds in conjunction with the IRA. The IRA must have the ability to buy the property on its own without you providing any indirect benefit. You putting down monies in advance could be construed as a case where your IRA could not have entered into the transaction on its own because it was not setup.
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  4. Self directed IRA owner thinks a passive investment in active business is not subject to UBTI

    UBTI is the tax that levels the playing field for tax exempt entities that invest and compete against businesses that pay taxes.
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  5. 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. Click the header to learn more.
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The information contained in this publication is intended for educational and informational purposes only. If you have a specific situation that requires interpretation as relates to self directed IRA and prohibited transactions you should seek the advice of a tax advsior.

Want to read the next five mistakes? Read Top 10 Mistakes People Make with Self Directed IRAs Part 2

Author: , Self Directed IRA Professional