Hugh Bromma
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The Roth IRA
A new law, effective on January 1, 1998, has definitely changed the opportunity for real estate investors to effect tax free income in the future. By now, everyone has heard of the Roth IRA.The Roth IRA is intended to stimulate savings among Americans in a new tax-free vehicle. There are some limitations which are important, and may exclude some individuals as a result of income constraints. The rules are important and may be advantageous to some now, and perhaps to others later.”Almost” Tax-Free IncomeThe Roth IRA does not do away with traditional IRA’s. It is intended to help individuals with…
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What Makes a Tax Free Deal a Real Deal?
Over the last year, a number of interesting questions have come up about tax free real estate deals. Among them are the question about doing too many of them in your Keogh or IRA (also known as the Dealer issue); what is the difference regarding transactions in a Roth IRA versus a traditional one; and the ubiquitous Unrelated Business Income Tax question.The answers are straightforward. You can do as many real estate or other transactions as you wish without being a dealer. The dealer issue, according to subject matter experts, such as prominent ERISA and IRA attorneys, and the IRS…
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The New Tax Law: Self-Directed Real Estate and Note IRA’s and Keogh’s
The New Tax law, also known as the Economic Growth and Tax Relief Reconciliation Act of 2001, expands opportunities to make larger investments in IRAs and Keoghs and offers possibilities for your plan not available before.Creative New PossibilitiesLet’s take a look some of the major advantages just for year 2002:The contribution limits, levels or indexes have changed for all plans.The IRA goes to $3,000 in 2002If you reach age 50 in 2002, you also get to make an additional IRA contribution of $500. The average age of and IRA account holder is 50.Education IRA limits increase to $2,000 (qualification indexes…
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Self Dealing in Tax Free and Tax Deferred IRA’s
The most frequently asked questions relate to doing transactions which are prohibited or self dealing. What is Self Dealing? Remarkably, the tax code makes some sense in this area. The concept of self dealing within the context of an IRA is easy: Your retirement plan is supposed to benefit when you retire, not before then. Self dealing transactions are outlined in the code as prohibited transaction, but clear examples of what is not prohibited are scarce.To begin, we will explore what “You”, Individual Retirement Account”, and “Disqualified Persons” are, and then what you can and can’t do or simply what…
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New Opportunities with Real Estate IRAs
With the continuing changes in tax legislation, came a benefit for IRA contributions: The non-working spousal limit of $250 was raised to $2,000. Although an additional annual contribution of $2,000 doesn’t appear to be much, it works out to a very large amount over time considering that note returns are between 8% and 12%.Over 20 years, a total of $40,000 contributed ($2,000 annually) works out to be about $100,000 at 8%. Of course, as IRA money, this is all tax deferred. For a married couple the additional $2,000 makes it to $200,000. Real property transactions can improve yields significantly. Property…
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How to Use Your Retirement Funds for Real Estate
In this articles, we will examine how one can use the tax-deferred money in their retirement plans to take advantage of real estate investing opportunities. This article explains how you can use your 401(k) funds to diversify your portfolio mix into real property.The 401(k) PlanFirst, it is important to understand some basic features of a 401(k) program. The 401(k) is a subsection of the Profit Sharing Plan section of the Internal Revenue Code. It allows for employee deferrals on a pre-tax basis. Employers may make this type of plan available to their employees by adopting an acceptable format forsuch a…
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Creative Lending and Profit Splits Using an IRA
Cash flow can come in a number of interesting ways when using IRA or qualified plan funds. Quite recently, we looked at some possibilities of transactions which may have multiple benefits. One in particular provided an interesting approach to income to both an Individual Retirement Accounts as well as income to the beneficial owner of the account, but not simultaneously, without violating prohibited transaction rules.Nancy has a Roth IRA with $250,000. She has a friend, Sam who is a contractor who needs cash to build an apartment complex. The deal is as follows:Nancy ‘s Roth IRA lends Sam $250,000 at…
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Buying Real Estate in Your IRA
Here’s the big question that confuses many: Can you have real estate investments in your IRA or Keogh? YES. You can. So that was easy, now what?The next question arises about leveraged real estate and how is it done. Yes. You can leverage real estate in a retirement vehicle, but it is so important to do it right, and all too often it isn’t. So rather than go into the details of how it’s been done wrong, let’s just get it right.Always Vest in the Name of the TrusteeIRA’s have custodians or trustees, as do Keogh’s and other qualified plans.…
