Your IRA or 401(k) can purchase and sell the following without a capital gains tax:
- Land
- Foreclosures
- Rentals
- Commercial real estate
- Promissory Notes
- Private Stock
- Gold
The Entrust Group
The Entrust Group is the premier provider of account administration for self-directed retirement plans with nearly $3 billion in investor assets. For over a quarter of a century, Entrust has been administering self-directed IRAs. A nationwide network of offices places expertise locally. Personalized service is the hallmark of Entrust, answering questions and processing transactions quickly and thoroughly.
The tax advantages are contributions may be tax deductible. Transactions made by the IRA are not taxable. If the IRA is holding real estate, when sold, there is no capital gains tax. Interest earned on promissory notes is tax free.
Self-directed plans prohibit self dealing and usage. As the benefactor of the IRA, you cannot use or derive benefit from the property. You cannot self manage the property and pay yourself a property management fee as an expense. In addition, disqualified persons are also prevented from using the property. Disqualified persons include your spouse, son, daughter, mother, father, grandparents, grandchildren and those of your spouse including your mother in law, father in law, son in law and daughter in law. A gray area where the IRS has not clearly excluded is your brother or sister.
Steps to buy real estate in a tax advantaged retirement plan:
1. Open/contribute to a Self-Directed IRA.
a. Fund account with IRA transfer, direct roll over or contribution.
2. Locate investment.
3. Make an offer on behalf of Self-Directed IRA.
4. Complete buy direction letter.
5. Review and approve title documents.
6. Deed recorded in Self-Directed IRA name.
7. Expenses paid from Self-Directed IRA.
a. Taxes, Home Association Fees, Insurance, Utilities.
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