Retro Bob <uctraing[at]ultranet.com> wrote:
- quote -

Did you miss the part of Pub 590 that describes this as a
prohibited transaction? Buying property for personal use
(present or future) with IRA funds is an improper use of the
funds.

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David Woods, EA, ChFC, CLU" <dwoods[at]woods-financial.com> wrote:

- quote -

Understood :-) That's why I am looking to have the IRA
"invest" in the house. The IRA would not be "paying off the
mortgage", it would be sold an interest (investment) in the
real estate (trust?). If when the real estate is sold, the
IRA would receive a proportionate share of the proceeds
which would then need to move to another investment.

If I use the money that the IRA uses to purchase it's
investment in the property to pay off the mortgage, that
would be a separate an distinct transaction.

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"Retro Bob" <uctraing[at]ultranet.com> wrote:
- quote -

My advice is that a QDRO allows for a tax free transfer of
money to a spouse. It DOESN'T allow you to pay off a
mortgage without being income or subject to penalties. If
there is a QDRO and it is used to pay off a mortgage, it is
either income to you or income to the spouse.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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David Woods, EA, ChFC, CLU" <dwoods[at]woods-financial.com> wrote:
- quote -

OK... let me complicate it then. I am divorcing. I would
like to use some SEP-IRA money to pay off the mortgage on a
jointly held property. This property will continue to be
held jointly for at least another 6 years.

I realise that I could have the Judge order the SEP-IRA
money be pulled as part of the settlement to avoid penalties
and then jus pay off the mortgage. However, then I will lose
the tax shelter on the amount pulled. Before doing that I
was thinking that I perhaps I could "invest" the money in
the property and maintain it as part of the IRA rather than
"pulling" it from the SEP. (don't worry about the divorce
settlement implications as in "will the Judge let me" -
that's obviously a completely different question for an
attorney).

The real estate will not be soled for at least 6 years. When
it is, of course, the money will need to be pulled in a
proportional share and credited to the IRA. I thought that I
could have real estate valued today, figure out what share
the IRA investment represents (roughly 10-15%), and return
the same percentage of the proceeds to the SEP-IRA for
investment elsewhere.

Any chance I could pull this off ? It is a legitimate
investment, with a potential for loss/gain. However, I would
be living in the investment... As I mentioned, I would be
happy (and expecting) to use a CPA to set this up... perhaps
an attorney for some sort of trust arrangement (?). But, I
think I need the combined expertise of this group to point
the CPA in the right direction - or at least to have some
way of evaluating what he says.

Advice appreciated.

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- quote -

Yes. The biggest problem is finding a custodian to hold the
real estate for the IRA - most banks and brokerage firms
won't touch it. Try a Google search on "IRA Real Estate" to
find possibilities.

Also, the IRA generally needs to own the real estate free
and clear, since if it is mortgaged, it can give rise to
Unrelated Business Taxable Income. Remember that
depreciation doesn't give any tax benefit inside an IRA,
which reduces the benefit. Also, if the real estate
appreciates, gain will ultimately be taxed at ordinary
rates, not capital gains.

Owning real estate in a Roth IRA may make more sense.

--
Thomas E Healy, CPA, PC
1650 38th St., Ste 202W
Boulder, CO 80301
Please send email to: tom[at]tomhealycpa.com, since I block all email at my
newsgroup address.
phone (303) 443-1804
fax (720) 489-3772

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"Retro
Bob" <nothinghere[at]all.com> wrote:

- quote -

Only if the real estate is treated as a real business and
the income taxed accordingly. In other words, you'd be in
the business of buying and selling real estate. If its just
owning real estate and possibly renting it, then no.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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Is there any way to have a SEP-IRA own real estate ? I don't
mind using a CPA to set it up if it's a convoluted thing to
do... just wondering if there's any way to do it ?

Thanks,
Bob

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