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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
Satisfied Customers: 585
Experience:  10 years experience
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My Roth-IRA bought an interest in an LLC that bought a piece

Customer Question

My Roth-IRA bought an interest in an LLC that bought a piece of leveraged real estate in 2002. I have only had to pay a nominal amount of tax on form 990 for the last few years, because depreciation sheltered income most of the time. But, if the much appreciated property sold now or in the future, its negative basis combined with high trust tax rates would result in substantial taxes. I am 64, so I cannot yet make a Qualified Charitable Distribution. I am confused about whether it gets a stepped up basis if I own it until death. How can I free this investment from 40% tax rates?
Submitted: 11 months ago.
Category: Tax
Expert:  PDtax replied 11 months ago.

Hi from Just Answer. I'mCustomer and saw your question.

The issues with SDIRAs (self directed IRAs) and the UBTI/UDFI income are much more complicated than most people expect them to be. More so, in fact, than I can explain in general terms. You want specific advice about not only the investment but how to dispose of it or otherwise avoid the large tax bite you expect when the LLC assets are sold with negative basis.

I can assist, but suggest that you might want personal advice, with a review of your documents, to review what you have done in tax reporting and what to do when the bad tax issues hit.

I will post an Offer for 1 hour professional time, which will include a review of your documents, research time, and a brief report or discussion of alternatives. Please advise.

Customer: replied 11 months ago.
Your offer certainly sounds reasonable, but for $350/hr., I will find a local expert who I can meet personally. What I was hoping for here was some alternatives to subjected to trust tax rates if the sponsor decides to sell the property before I turn 70-1/2 and to determine whether my estate would get a stepped up basis.
Expert:  PDtax replied 11 months ago.

sorry, but the ownership of the investment (LLC) complicates things, your basis in the interest, negative basis in the LLC interest, makeup of the investment (debt financed LLC interests create UDFI, for example), suggests that a general discussion would be long, cover material you don't need, and take much more effort to sort out what would be applicable to your specific situation.

No question a local tax pro would offer specific advice. I just don't believe general discourse on the subject does much good when you really want specifics.

I will return your question to the queue.