Tag Archives: Bankruptcy

I invested with crooks and was awarded a judgment but…

Question: In 1997 my bank rolled over $150,000 to a rollover account in florida. At this time the monies were stolen. I was awarded a judgment against the 4 persons that took the monies but have only collected $6,000 so far. If, and when I collect any or all monies, do they belong in my IRA account that they came from? And can a third party like a bankruptcy trustee access the judgment and any monies collected to pay off any creditors?

I never did see or have control of these funds. They were transferred into a self directed IRA and stolen from there. I have been told that a bankruptcy trustee can not use these funds to pay off any creditors and any funds recovered should go back into my ira and if treated as a withdrawal it would be taxable event. If this true is their any law and or cases to support this?

Answer: With regard to your question below, it is somewhat difficult to answer without more information, and in any event the question is best answered by your bankruptcy attorney as well as the attorney who is helping you collect this judgment.  My first question would be who has the judgment, you or your IRA?  If you were the plaintiff individually, then the money collected may not be exempt from the bankruptcy estate since it isn’t in the name of your IRA, whereas if the judgment is in the name of your IRA it is may be exempt as an asset of your IRA, not you individually, depending of course on state law where you are as well as whether you chose state or federal exemptions in your bankruptcy.  Your attorney will be able to give you better information than I can.

The bottom line is that there are insufficient facts to really answer your question, and what you really need is legal advice from an attorney who has all the facts in front of him or her.  I’m sorry I can’t be of more assistance to you.  Good luck in your future endeavors and thanks for the question.


Can we partner with family members on an Oil & Gas project??

Question: In 2008 an oil company drilled a successful oilwell (30 BOPD, 100 barrels saltwater/day) on my mother’s land and she owns the mineral rights.They were disposing of the saltwater by vacuum truck and hauling to another location.Before the oil company could drill a saltwater(produced ) water disposal well, they went bankrupt. My mother now owns the well, the borehole. My brother and I are both experienced in the oilfield. My brother and I want to go into business together to drill a new disposal well or re-enter an old well in order to get the oil well producing again. Can my brother and I go into business together to get this well producing and make a profit. My brother will fund his 50% of the expenses with his own private funds. I want to use my self directed IRA to fund the other 50% of the expenses. My brother will receive 50% of the profits and my IRA will receive the other 50% of the profits. Of course, my mother will receive her share of the royalties. Is this legal?

Answer: Thank you for your inquiry.  There are a number of problems associated with using your IRA in this transaction.  First of all, you would not be able to fund expenses personally for an investment which your IRA owns.  Second, your mother is a disqualified person as to your IRA, and the investment by your IRA clearly would benefit her, in as much as she receives royalties as a result of making the well produce again.  This would make your proposal a prohibited transaction.  Third, your brother, while not a disqualified person to your IRA, is someone in whom you may have an interest which would affect your best judgment as a fiduciary for your IRA.  If true, it could be argued that a benefit to your brother may be deemed to be an indirect benefit to you, which again, could make this a prohibited transaction.  Fourth, using your own talents to make the deal work may be considered a prohibited transaction or at least an excess contribution to your IRA.  Additionally, as a working interest in an oil well the transaction would likely produce Unrelated Business Taxable Income (UBTI) on which your IRA would owe taxes, assuming the investment made money.  While making an investment in your IRA which causes it to pay taxes on its UBTI does not necessarily mean you shouldn’t do any particular deal, it is something that you must take into account when deciding if a transaction is right for your IRA.

The bottom line is that based on the facts stated in your email I would not think your proposed investment is a wise one in your self-directed IRA, although I cannot give you tax, legal or investment advice.  If you have any further questions, or if you can locate an investment involving non-disqualified persons, we would be very happy to assist you with self-directed IRA services.  Have a great day!

Also, replay H. Quincy Long’s Prohibited Transactions Webinar