Leaderboard

Tom: I've never dealt with a Self Directed IRA directly. However several clients have come to me with schemes to use one for a rental property, or even to invest in a franchise business. It seemed really popular among some franchising companies a decade or so ago - the franchising company would ally with a S/D IRA administrator to promote this as a way to buy into the franchise. (Maybe they still do). After reading a little about the rules, and studying a few stories about how these schemes failed, primarily over "prohibited transactions" as you mentioned, I decided to never touch one. I learned just enough about them to avoid them like the plague. I'd just tell the client that if they moved ahead with the plan they would need to find another accountant. Furthermore, I knew someone who was scammed by a financial advisor who set up a promissory note in a S/D IRA that even their family didn't know anything about until it blew up in their face. So I have a strong bias against these contrivances. Not saying they never work or there isn't a place for them, but there's too much room to get tripped up by seemingly minor mistakes as well as lots of room for outright abuse.

Tom, you make sense. I'm going to file the girls return for free with explanation, as her parents have paid me handsomely.

I’m beginning to wonder whether the client knows more than they are telling you, but they’re already aware that the whole story is going to cost them money and they’re hoping to somehow slide by. is it possible this is rental property (or some other business asset) held in a self directed IRA and they titled it back to themselves because it couldn’t self-fund maintenance or repairs?

I miss read your past... sorry. Yes, you must have the federal return filed correctly all the time, with extra care when immigration papers are involved. Most of the time, people don't mind even if they have to pay extra taxes because they don't want to risk the "papers".

People have also tried to keep possession of gold coins in a self-directed IRA. Of course, the IRS frowns on this: https://www.thetaxadviser.com/issues/2022/feb/taking-possession-coins-irs-taxable-distribution.html https://www.journalofaccountancy.com/issues/2022/mar/gold-coins-taxpayer-home-taxable-ira-distributions.html This case may have led other custodians to be more careful about similar arrangements, resulting in distributions such as this 1099-R.

https://www.irs.gov/taxtopics/tc421 https://www.irs.gov/publications/p970#en_US_2023_publink1000178003

The capital loss carryover of $3k has not been increased since 1978. According the Congressional Research Service, it would be about $13k if adjusted for inflation.

While holding down Alt, type 0162 to get ¢. Interesting topic. My maybe future DIL likely gets a stipend for services performed for her PhD advisor. They travel to and stay at an out of state location several months of the year for the research work. But, I don't ask about her finances for safety's sake.

That would be tech support 800.638.8291 and follow the prompts. A few years ago I encountered an error in programming and reported it. The issue was corrected rather quickly. It was moved up the chain when the first tech didn't quite get it but resolved.