Self-Directed IRA (Rental Property)

[SFBOB]

Quidant Financial 1-888-4455

I just googled Self Directed IRA's. I called and talked to them and the answer was the parents could not purchase the house from a family member. This firm is located in Seattle Washington and seem willing to discuss the situation if your cleint wishes to phone. Maybe daugter could trandfer the property as a gift to another party and have the parents purchase form the third party. Just a thought. Good Luck Bob

[BOB W]

I thought whatever happens in an IRA stays in an IRA until monies are distributed..?? Why would a tax return have to be filed for the rental issue?

[JohnH]

Thanks for your thoughts.
I have much more confidence in your opinion that in any barber, postman, or dog groomer.

[WhiteOleander]

I don't have alot of info on this idea. I have seen articles that the IRS takes a very dim view of an IRA holding real estate. The consensus was that it was difficult to find an administrator to run the IRA. The IRA would have to file a tax return and be responsible for paying taxes, repair bills, etc. That's more than most want to get involved with.

One article said that the owner of the IRA better never even drive by the property. The owner should have no connection whatsoever to the property. Otherwise the IRS will consider the whole thing a prohibited transaction. So, since this is a self directed IRA and the property was purchased from a relative, I don't think the IRS would say this is okay.

Sorry I don't have any cite to give you. This is along the lines of "my barber's postman's dog groomer said".

[JohnH]

Taxpayers' daughter & her husband want to buy a new home. Problem is, they can't sell their old starter home in this market. Her parents are planning to buy the old home and convert it to a rental. (not renting to family members or related parties, just a plain old rental house).

The parents want to know if they can use a self-directed IRA to buy the old home from the daughter & SIL. I know they can't own it in the IRA if a family member lives in it, but does that restriciton apply to buying it from a family member as well? Would the simple act of purchasing the property (at fair market value) from the lineal decendant constitute a prohbited transaction?