i understand the concept of purchasing real estate through a SDI. I want to know if anybody has come up with a strategy to get cash flow out of the real estate purchased via a SDI? Immediate cash flow, before retirement age(legal options only please).
One of the problems I have found is the lack of info on what is and isn't legal.
It would seem that an LLC partially owned by the SDIRA and partially owned individually would be able to do this.
Cash comes into to LLC and partially flows thru to SDIRA and part to the individual.
Can the following be used to allocate cash to the individual and gains to the SDIRA?
The LLC allows for the "special allocation" of profits--the disproportionate splitting of member profits and losses (in different percentages than their respective percentages of ownership). This means that members can enjoy the benefits of receiving profits (and writing off losses) in excess of their individual ownership percentage.
You need to seek competent professional advice on this. One mistake and you can subject yourself to early withdrawel penalties, taxation and loss of deferral. This isn't an issue that can be adequately addressed in a forum.
the only strategy i can suggest is invoicing the IRA for certain services. As long as the services are reasonably priced, even if you are audited, you should be able to prevail.
the only strategy i can suggest is invoicing the IRA for certain services. As long as the services are reasonably priced, even if you are audited, you should be able to prevail.
You can take cash out, legally, any time you want to as long as you are willing to pay the income taxes.,
If you want to take the cash out tax free, then you are out of luck.
In addition to paying income taxes as NewKid mentioned, you will also have penalties unless you meet one of the few narrow exceptions to avoid the penalties.
I know there are people out there doing it. I was just hoping one of you would enlighten me. I know it has to do with owning a SDI and also owning a S-corp as a partnership.
| Quote: |
|
Your SDIRA cannot own shares in a S-Corp. As far as setting it up as a partnership with an LLC, that can work if done properly from the get-go; but splitting profits and favoring one partner over the other is dangerous. It's one thing to partner with a friend and have a private agreement to split the profits differently than the percentage owned by each partner, but favoring yourself over your own IRA is a sure-fire way to have the IRS on your back.
When the IRA/LLC concept came out, there were guys who partnered up their Traditional and Roth IRAs. They purchased the property with their Traditional money and then flipped the profits to the Roth. Needless to say they got in trouble.
In this case, using your IRA funds to purchase a property and then essentially favoring yourself for the cash flow would be a prohibited transaction. There are some companies out there that do this sort of thing:
Guidant Financial
Checkbook IRA
Asset Exchange
I would strongly suggest calling these companies before you proceed.
Cheers