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Resolving your IRA’s debt
It has become very common for investors to utilize their IRA accounts or other deferred compensation plans to purchase real estate and invest in businesses. The U.S. Tax Court in recent years has acknowledged the use of IRAs and 401(k) plans for such purposes. This allows for the diversification of part or all of your retirement assets away from the risks of the stock market.
- Utilizing the funds in your IRA, 401(k) or another deferred compensation account to make an investment in real estate or a small business in the event you do not have other funds available
- Diversify part or all of your retirement assets away from the stock market and into a possibly less risky investment.
- Possibly get a better return on the money you have sitting in your IRA or 401(k)
- Enjoy tax-free or tax deferred income from the investment
Dos And Don’ts
There are various “dos and don’ts” involved with such transactions. Renkemeyer Law Firm has vast experience in the use of IRAs and 401(k) plans in making such investments. In fact, Mr. Renkemeyer has personally litigated many of these issues in the U.S. Tax Court and beyond. If you are considering making an investment into real estate or a business from your IRA or 401(k) plan, you should first seek the advice of Renkemeyer Law Firm.
There are two systems of taxation in our country. One for the Informed and one for the uninformed.
Justice Learned Hand
Us Court Of Appeals
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Read Faq’s To Know More
Q: Who can use the IRA or 401(k) plan to make alternative investments?
A: Anyone. However, there are certain limitations on accessing your 401(k) plan while continuing working for the employer that sponsors the 401(k) plan.
Q: What types of real estate can I buy using my IRA or 401(k) plan?
A: Any type of real estate or small business can be bought with an IRA or 401(k) plan. However, you cannot personally guarantee the loan from a bank used to purchase the real estate or small business.
Q: What are the tax benefits of using the IRA or 401(k) plan to purchase real estate?
A: If structured properly, the earnings from a real estate investment flow to the IRA without a taxable event. If the IRA is a traditional IRA, the profits are taxed years later when distributed to you, like any other IRA distribution. If a Roth IRA is utilized, then no taxes are paid now from the investment, nor later when distributed.
Q: Are there hidden "traps" to worry about when using an IRA to purchase real estate?
A: Yes. There are clear preclusions of certain transactions between yourself and the IRA. These are known as “prohibited transactions.” These are typical self-dealing types of transactions. This is why it is vital to obtain tax advice prior to using your deferred compensation account to purchase real estate or a small business so that you understand and avoid these issues.