Using IRA Proceeds to Invest in Real Estate and Other Alternative Investment Vehicles


Funds in a self-directed IRA typically are invested in stocks, bonds and mutual funds. What you may not know is that you can use your self-directed IRA to invest in real estate, privately held companies and other alternative investment vehicles, and defer any tax gains associated with those investments until retirement. Sound too good to be true? This technique has been permissible under IRS rules since 1974.

Benefits of Alternative Investments Besides deferring the tax gain on any “alternative” IRA investment until distribution, perhaps the biggest advantage of such an investment is that it allows the IRA owner to invest in a vehicle with respect to which he or she is most comfortable. For example, if the IRA owner is knowledgeable about real estate transactions, the IRA owner may prefer to invest his or her IRA assets in real estate instead of stocks and bonds. At the same time, however, when investing in illiquid assets, if the IRA owner is at or near retirement age, the IRA owner must be sure to leave sufficient liquidity in his or her IRA account in order satisfy the required minimum distribution rules.

Below is a list of example investments which an individual IRA owner may and may not make through his or her IRA.

Permissible Investments:

-Real estate (sole ownership or tenancy in common)

-Closely held C corporation stock

-LLC membership interests

-Limited partnership interests

Impermissible Investments:

-Privately held S corporation stock

-Life insurance

-Artwork and jewelry

-Any business where the IRA owner and/or his family owns 50% or more

Please see full article below for more information.

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Published In: Finance & Banking Updates, Commercial Real Estate Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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