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Subject:  Re: Real Estate in IRA/Roth IRA Date:  11/8/2002  9:33 PM
Author:  ptheland Number:  35199 of 88513


Do you have an on-line link to the article, or will I have to get a paper copy?

Until then, did you notice anything different from what I posted here:

The article didn't state but I would think you could create a corporation, sell the IRA property to the corporation and then distribute appropriate numbers of shares in the corporation–if you are willing to deal with the paperwork and pay the professionals to work out the details.

Unfortunately, the detail the professionals will be working out are how much penalty you owe on this transaction. What you describe would be a prohibited transaction. You can't sell to or purchase from your IRA. And the definition of "you" would include a corporation that you control.

If the property purchased is a rental property, its not clear if you could rent one of the units from your IRA. Could your grandmother?

No to both of these. These are additional prohibited transactions. You are, in this case, buying from your IRA. Your lineal ancestors and descendants are among those that are too closely related to have transactions with your IRA.

Could a friend?

Yes. They are not related to you.

Must they pay market rates?

No, but why would you want to rent to a friend at below market rates? And I doubt that your friend would pay above market rates.

(If not, this becomes a device to transfer funds in and out of your IRA–ideally without paying penalties. I'm sure the IRS would watch this aspect closely.)

If you're talking about giving your friend some money so that they can pay more than market rents, then yes, I'd expect you to have a problem with the IRS. They are free to look at the substance of a transaction over it's form.

Can your IRA take out a mortgage? It sounds like it can.

I discuss that issue in the post I linked above. And there was some further discussion of it in the rest of the thread.

Can you become a real estate magnate with your IRA account? Its possible.

I absolutely agree.

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