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Jax Tax
Jax Tax, Tax Attorney
Category: Tax
Satisfied Customers: 1408
Experience:  JD, LL.M in Business and Taxation, IRS Enrolled Agent. Expert in Business and Tax Transactions
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Steve, re Roth IRA: I own 100% interest in an LLC. The

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Steve,
re Roth IRA: I own 100% interest in an LLC. The LLC owns used industrial molds, and is party to a mold lease contract with an unrelated start up manufacturer. No income, just cash drain/expense to date for my LLC. LLC has negative book value, but I would like to transfer 100% ownership to a Roth IRA while its value is nominal, just in case it starts enjoying revenues going forward.
Only asset of the (yet to be created) Roth IRA would be the LLC interest.
Can I do that? thanks

Jax Tax :

What it appears you are trying to do is set up a self directed IRA. This is a common and acceptable practice. It can be done. The only down side is that you can no longer be involved at all with the business. Not as a manager. Not as an employee. Not in any capacity at all. You cannot receive any payment from the business or it would be considered an IRS distribution.


 


 

Jax Tax :

You would be required to find a disinternested 3rd party to manage the self directed IRA which would likely cost far more than it is worth since the business is not profitable.

Jax Tax :

I suggest that you look further into Self Directed IRAs. In the end, you will likely decide that such action is not in your best interest.

Customer: replied 4 years ago.

I understand the first part of your fragmented reply, but unsure about the second part- if I have nothing to do with the LLC after the transfer of 100% ownership interest to the Roth IRA, why is it then necessary to also hire a disinterested 3rd party to manage the Roth IRA? What would my continued "interest" then be? How is that then a self directed Roth IRA?


 

Generally, a self directed IRA is used to invest in someone else's business. Your IRA invests in a company that is not otherwise available on the general stock market.

When you start talking about utilizing a business that you own to create a self directed IRA, it really does not work. You cannot own, manage, or otherwise have an interest in a business that is owned in part or full by your IRA. The IRA themselves can be the owner, but you need an individual to manage the business. You cannot after the transfer have anything to do with the business.

Your continued interest would simply be as the owner of the IRA.

Honestly, I think what you are trying to do cannot be done.

Jax Tax and other Tax Specialists are ready to help you
Customer: replied 4 years ago.

thanks for your feedback.