- This topic has 1 reply, 6 voices, and was last updated 18 years, 4 months ago by
.
-
Posts
-
Before getting serious about investing in real-estate using a self-directed IRA, I need one simple question answered please. I am currently 47 years old. Assume I invest now in raw land in Costa Rica, on a property I wish to build on sometime in the future, BUT before I turn 59 1/2, i.e., I will retire at 55. What is the mechanism to “liquidate” the asset’s (land) value at age 55 such that I roll it back into another qualified IRA plan, allowing me to build on it. In other words, can it be sold from my IRA to myself at fair-market value?
I really do wish this was a simpler topic because there would be so many more people willing to buy property in their IRAs
Unfortunately it’s not simple (you can NOT live in the home you buy in your IRA for example although you ‘may’ be able to rent it from your IRA) and the paperwork does take some time but there are experts out there who are willing to help
I would suggest that you take a look at the two articles below and contact the author Glen Mather of Entrust for more information:
Costa Rica Real Estate in Your IRA.
Costa Rica Real Estate in Your IRA – Tapping into your Personal Land Bank.
Scott Oliver – Founder
WeLoveCostaRica.comScott, what if Sr. Byter bought the land in an IRA now, later built a house on it using IRA cash assets, and then rented it to a Costa Rican corporation to occupy? I’m thinking of him renting the property to (say) Gatorbyter Retirement Rental Corporation, S.A. which, coincidentally, he owns.
I’m sure that prople have found ways around these somewhat arbitrary requirements David but as a professional investment advisor – who can not and does not work with US citizens as offshore investment – I can not personally encourage anyone to get involved in those areas that might be considered ‘gray’ by the tax authorities.
Having said that, if you know how this can be done legally, PLEASE do tell us how you thing this could work for our VIP Members.
Scott Oliver
As I understand it, the only way the IRS allows for using IRA funds for investments in real estate is if the property is managed by a third party (like REITs) in an arms-length transaction (i.e. you can’t have an ownership interest in the management firm). Turning around and renting it to an S.A. owned by the same person does sound interesting though. After all, there’s nothing wrong with purchasing products from a company that’s in your IRA portfolio. However, since there’s only one client, the managing firm might be accused of collusion&
The endless machinations people go through to find loopholes in the tax codes also lead to endless closing of loopholes by the IRS. The only ones who truly know are the tax attorneys that work with the IRS on a daily basis. Very gray, and certainly not simple.
Perhaps I was not clear. I would wish to liquidate the IRA property/asset completely PRIOR to building on it. Could I sell it at fair-market value when I am 55? And perhaps the purchaser of the property just might be my own corporation? That way I have absolutely no contact with the property whatsover while it is in my IRA portfolio. Just some ideas. Shoot it down if it is wrong please! This has to be a scenario that others have encountered before.
check out http://www.ie-management.org I recently purchased some property in CR using money in an IRA. I’ve been working with Marco Caporale for a few years and he is very knowledgable in investing using your IRA and could probably answer your questions.
Per email correspondence with Glen Mather: “Any distribution from your IRA is taxed at ordinary income (You wouldn’t sell it to yourself, just simply have the administrator retitle the property from your IRA to you personally). A distribution prior to age 59.5 would trigger an additional 10% tax penalty. The property must be appraised prior to taking distribution and this appraisal must accompany the selling instructions to your administrator. You could build on and use the property in the future, but you first must take a distribution”.
Glen also said that I could not sell the property to my own corporation. “There are several issues involved, one with the contribution to the IRA, and the other is a potential prohibited transaction regarding selling the property to your corporation”.
In short there appears to be no legal way to do this unless I wish to suffer a 10% penalty for early distribution!
Thanks all (and Glen).
Thanks for sharing gatorbyter – great up to date feedback straight from the ‘horse’s mouth’ – an expert. That’s who we want to hear from.
Scott Oliver
WeLoveCostaRica.comAnyone wants to do Self-Direct IRA, ask me if you want.I just did mine. Takes about 4-6 weeks.Very smooth.
Rahul
Rahulthack@aol.comCould we perhaps ask you Rahul to help all of our VIP Members and ask you to write a brief article about “how to” do it?
I will then feature it in our newsletter because a lot of people are interested in this …
Scott Oliver – Founder
WeLoveCostaRica.com
- You must be logged in to reply to this topic.
