Tag Archives: Investing

How many Real Estate transactions can I complete in a calendar year?

Question:

Quincy

With my Quest Roth IRA and utilizing the PPT, how many real estate transactions can I complete in a calendar year. Specifically optioning  a property then, assigning the option and pocketing the assignment fee.

 

Answer:

 

 

There is nothing that indicates a specific limit on how many such transactions you can do BUT (and it’s a big BUT) there are some potential areas of concern.  An IRA is meant to be for investments only, and not necessarily for running a business.  So if you are in the business of buying and selling property, or buying and selling options on property, then your IRA may be subject to unrelated business income tax on its profits from that business.  So how many can you do before it’s considered to be a business?  Nobody knows.  It has to do with intent, and volume, and how exactly the business is handled.  The best hint I can give you is that if you would report your activity as business income outside of your IRA, then it is almost certainly business income inside your IRA, and taxes will be owed by your IRA on its business profits. You should consult with your CPA on this issue.

 

Another issue you will want to consult with your CPA on is the tax filing requirements for your personal property trust.  My experience has been that many people using trusts ignore completely the tax filing requirements for trusts.  If your trustee is using Optional Filing Method 1 instead of filing a 1041 for the trust, then you don’t have to report anything to the IRS, but you will want to make sure that option is available for your trust activity reporting and that the conditions for using this option are acceptable to you.  I did write an article on this topic and if you like I can send you a copy of it.  Or you can just look it up on my blog at www.irawebadvisor.com.

 

A bigger issue involves who is doing the activity.  If you are essentially running a business inside of your Roth IRA, then you may be considered to be contributing your services to the Roth IRA.  This has the potential to be considered by the IRS as an excess contribution under IRC Section 4973, or a prohibited transaction under the prohibited transaction rules of IRC Section 4975(c)(1)(C) (the provision of goods, SERVICES, or facilities between a plan and a disqualified person).  It may also be considered an abusive Roth transaction which falls under IRS Notice 2004-8, in which case it is a listed transaction that you must specifically report in order to avoid severe penalties.

 

If it sounds like I’m trying to scare you off of using options, I am not.  I am simply pointing out that you cannot donate your personal services to your Roth IRA where the IRS will never get its share of the money.  You may make as much money as you like on your INVESTMENT activity.  You may even own a business in your Roth IRA, but you personally cannot run that business, and the business must pay taxes on its income, either through the entity that owns the business or directly by the Roth IRA if the entity running the business is non-taxable.  There is often a very fuzzy line between investment selection (which is no problem) and providing services.  Some people are willing to dance closer to the line than others, and there are no definitive answers.  The analysis is very fact specific, so there is no bright line answer to your question.

 

One thing I think is fair to say is that “piglets get fed but hogs get slaughtered.”  By that I mean that too much of a good thing can cause the IRS to take the position that what might otherwise be investment activity changes its character to business activity.  The higher the dollar amount involved the higher the level of interest by the IRS will be if they audit.  Generally it is a good idea to have more than just one type of investment activity to avoid the appearance that you are simply creating options as inventory to be sold off for a profit.

 

As you know I cannot give you tax, legal or investment advice.  Hopefully the information above will give you and your tax or legal advisors some areas to analyze.  Good luck with your investments, and have a great day!

 

The Balancing Act

I traveled to Pompano Beach, FL last week to record a financial segment for “The Balancing Act”, a Lifetime Television show.  A lot of hard work went into this and it went off without a hitch! It was such an honor for me to be on their show, the topic was my personal favorite (and area of expertise), Self-Directed IRAs. I finally got to wear my awesome suit that I have been tweeting about but I wasn’t ready for my lesson on wearing make up and eating spicy food- ha ha!!

See below for the pics And click HERE for the Press Release!

The recording will air on February 19th- Make sure you record your DVRs to watch me appear on National Television!!

Using Self-Directed IRAs and 401(k)s to More Money Now and to Build Your Retirement Wealth for the Future

By H. Quincy Long

            Self-directed IRAs and 401(k) plans have been around for more than 25 years, but many people are just now becoming aware of how powerful this idea can be.  There are currently trillions of dollars in retirement plans.  Do you know how to unlock your own retirement funds as well as the retirement funds of those within your circle of influence for real estate related and other non-traditional investments?  Your knowledge of self-directed retirement plans can help make you money now as well as ensuring that you retire in style.

            Plans available for self-direction.  A lot of retirement wealth is in traditional IRAs and employer sponsored plans.  If you leave an employer, the funds in the employer plan can be moved into a self-directed traditional IRA.  This includes money rolled over from 401(k) plans, 403(b) plans, 457 deferred compensation plans, and the federal thrift savings plan.  Self-employed people may have their own Individual 401(k) plan, which may even include the new Roth 401(k), no matter what their income level.  Other employer sponsored plans which can be self-directed are SEP IRAs and SIMPLE IRAs.

            The king of all IRAs when it comes to building tax free wealth is the Roth IRA.  Even if you do not qualify for a Roth IRA due to income limitations currently, in 2010 the income limitation for conversions from a traditional IRA to a Roth IRA will be eliminated.  At that point even the very wealthy will be entitled to have a Roth IRA.  This is a great planning opportunity.

            How does paying for your child’s education or your health care expenses with tax free income sound?  You can even self-direct a Coverdell Education Savings Account (ESA) or a Health Savings Account (HSA), and as long as distributions are for qualified education or health care expenses they are TAX FREE FOREVER.  With an HSA you even get a tax deduction for putting the money in!

            Perhaps the best news of all is that you may combine your IRAs and other self-directed plans to make non-traditional investments.  Even better, you can invest your IRAs with other people’s IRAs or even non-IRA money of people you know.  The key element is that you must have your plans administered at a self-directed IRA company like Quest IRA, Inc.

            Make money now.  We have all heard that knowledge is power.  Your knowledge of self-directed retirement plans can translate into money in your pocket today.  How?  It’s easy!  While it is true that you may not derive a current benefit from your own IRA’s investments, this does not mean that you cannot benefit right now from Other People’s IRAs (OPI).  Simply become knowledgeable about self-directed plans by reading books and attending seminars or workshops, then spread the good news!

            Quest IRA, Inc has many seminars and workshops to help you and those whose IRAs you want to use to make money for yourself.  There are also numerous books on the market explaining the power of self-directed retirement plans, such as Hubert Bromma’s “Investing in Real Estate With Your IRA and 401(k)” which are selling quickly.  For more information on seminars and workshops in your area, visit the Quest IRA website at www.QuestIRA.com  Even if you don’t have a dime of retirement funds yourself, you can use your knowledge to:

            *          Borrow other people’s IRA money to do your deals today

            *          Sell real estate, notes or other non-traditional assets to people’s IRAs

*          Make others aware of an opportunity to invest in your business (always be aware of securities laws when raising money)

            Anytime you go to a gathering of people, there are most likely millions of dollars available for non-traditional investments in their retirement plans.  It is up to you to let people know about this powerful tool, and how they can take some or all of that anemic money and put it to work in a way that benefits both you and them.  You will look highly intelligent and will inspire confidence with your advanced knowledge.  You owe it to yourself to learn more today.  Quest IRA, Inc. can help.

            Invest your own IRA in what you know best.  With all your knowledge of self-directed IRAs, you will most likely want to invest your own retirement funds in non-traditional investments as well.  What investments do you know the most about?  Almost without exception, you can invest in what you know best with your own IRA.  The law contains very few investment restrictions for retirement plans, but most custodians refuse to allow IRAs to invest in non-traditional investments such as real estate simply because they are not set up to handle them.  Not true with Quest IRA, Inc.!

            Quest IRA, Inc. self-directed retirement plans are under the same laws as plans at any other custodian or administrator.  We are simply more flexible when it comes to administering non-traditional investments in your IRA or other self-directed plan.  Quest IRA, Inc. clients have used their retirement plans to purchase all of the following and much more:  real estate, both foreign and domestic, including debt leveraged real estate, real estate options, loans secured by real estate, unsecured loans, limited partnership interests, limited liability company shares, stock in non-publicly traded corporations, land trusts, factored invoices (including factored real estate commissions), tax lien certificates, foreclosure property, joint ventures, oil and gas interests and even race horse colts!  You are limited only by your imagination.

Ignorance may be bliss, but it will not make you wealthy.  Use your knowledge of self-directed IRAs to make money now, to help others build their retirement wealth as well as your own, and to retire in the style and comfort in which you would like to become accustomed.  Contact Quest IRA, Inc. today!