How to Invest Self Directed IRA Funds in a Limited Liability Company & Make Nontraditional Investments

Question 1:  Can I form a limited liability company in which my IRA is a member and use all or a portion of my IRA funds to make self directed investments through the LLC in various assets, including, but not limited to, real estate?

Answer:  Yes, but there are some types of assets that cannot be acquired.

Question 2:  Does it take a ton of money and a rocket scientist to form an LLC owned by an IRA (“IRA LLC”)?

Answer:  No:  I form Arizona IRA LLCs for .  I’m not a rocket scientist, but I am an Arizona LLC and business attorney who has a masters degree in income tax law from New York University School of Law.  I understand how to form IRA LLCs and have formed LLCs, including many IRA LLCs.  See our five star Google & Birdeye reviews.

Why I Form IRA LLCs

Because I have formed limited liability companies, people frequently contact me and ask if I can create an Arizona LLC owned by one or more IRAs.  The answer is yes.  For the purpose of this article, […]

How to Invest Self Directed IRA Funds in a Limited Liability Company & Make Nontraditional Investments2024-03-08T07:29:10-07:00

Can My IRA Invest More Money into an LLC Partially Owned by My IRA?

Question:  Two years ago my spouse and I caused our IRAs to make self-directed investments into an LLC that purchased a rental home.  Each IRA is a 50% member of the LLC.  The property needs repairs that will cost more money than the LLC has available.  Can we cause our IRAs to make additional capital contributions to the LLC to fund the repairs?

Answer:  No.  If either IRA were to make an additional capital contribution to the LLC, it would create a prohibited transaction under Internal Revenue Code Section 4975(c), which provides that a:

“prohibited transaction” means any direct or indirect— . . . transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a plan”

Because the two IRAs each own 50% of the LLC, the LLC is a disqualified person under Section 4975(e)(2)(G).  This provision says that a disqualified person is an entity 50% or more of which is owned by a fiduciary.  Each IRA custodian is a fiduciary with respect to its IRA account and because the custodian owns 50% of the LLC, the LLC […]

Can My IRA Invest More Money into an LLC Partially Owned by My IRA?2018-05-13T13:58:53-07:00

Why Do Some Document Preparers & Attorneys Charge a Lot More to Form an IRA LLC than You Charge?

Question:  Why do some document preparers and attorneys charge substantially more than the you charge to form an IRA LLC?

Answer:  Because they can get away with it.  Most attorneys who may routinely form limited liability companies never form an LLC that has an IRA or a retirement plan as a member so they are unlikely to form this type of LLC when asked.  Most of the small number of attorneys and document preparers who actually form IRA LLCs charge far too much because they have little, if any competition, and they know that is it very unlikely a prospective client/customer will be able to find somebody else with the knowledge and experience to form an IRA LLC.  These types charge far too much because they believe they have a monopoly and can set a high price because clients/customers have no other place to go to form an IRA LLC.

Years ago I went to a seminar in Phoenix, Arizona, about how to use self-directed IRA funds to invest in real estate through an IRA LLC.  The person who gave the presentation was an attorney not licensed to practice law in Arizona.  He told […]

Why Do Some Document Preparers & Attorneys Charge a Lot More to Form an IRA LLC than You Charge?2024-03-08T07:35:28-07:00

IRS Private Letter Rulings Concerning IRAs

An IRS private letter rulings (PLRs) is a statement by the IRS given to a taxpayer who submitted a request to the IRS for it’s position with respect to one or more federal tax issues set forth in the PLR.  The PLR process is a way for a taxpayer to determine in advance of taking action if the proposed action will cause a problem with the IRS.  PLRs annot be relied on by any person except the person who applied for and obtained the PLR.  Although PLRs do not have any precedential value, they are instructive because they do indicate IRS thinking with respect to the issues addressed in the PLR.

Note: As we discuss IRS Private Letter Rulings we are not giving any tax or legal advice. 

IRS Private Letter Rulings have little precedential value. The statements made by the IRS in Private Letter Rulings can be relied on only by the taxpayer(s) who requested the Private Letter Ruling.  The IRS Private Letter Rulings listed below are for informational purposes and to inform you as to positions and statements made by the IRS with respect to IRA investments and transactions.

IRS Private Letter […]

IRS Private Letter Rulings Concerning IRAs2018-05-13T13:58:54-07:00
Go to Top