Message Font: Serif | Sans-Serif
No. of Recommendations: 1
It looks like he needs to either 1) set up a new LLC and make the SDIRA the only member, or 2) add the SDIRA as a member to his existing LLC.

If he sets it up as part of his existing LLC, he runs the risk of committing self-dealing infractions, which would invalidate the IRA, resulting in expensive tax and penalty consequences.

Either way, it looks like someone else has to be the administrator, or maybe I am not using the correct term.

Yes, a 3rd party administrator is required.

Also, does the SDIRA get all the profit from the rentals, or can it be split 50% between the SDIRA and the existing LLC?

All income from the property must remain in the IRA, or it is considered a withdrawal, with associated taxes and penalties. All expenses (initial purchase, property taxes, insurance premiums and deductibles, repairs, maintainence, any utilities not paid by the tenant, HOA fees, special assessments, etc.) for the property must be funded from only the IRA.

Because IRAs are not allowed to take out loans with recourse, it is unlikely that he will be able to use a loan to purchase property - the IRA would need to fund the entire purchase price.

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.