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My friend had 250k in a 401 account of a company she was…

Hello, My friend had 250k...
Hello, My friend had 250k in a 401 account of a company she was working in. Now she left the company and the 401 funds is available for self directed IRA through which she is able to put this funds in real estate IRA. She saw a rental town home for 350k, so she is short of 100k within the 401 to be able to buy the rental TH under a self directed estate real estate investment. Is there any way that the 100k can be loaned to the IRA so the TH can be purchased and rented within the self directed IRA. Thanks
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Answered in 13 minutes by:
3/28/2018
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,744
Experience: Taxes, Immigration, Labor Relations
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The issue that assets in the IRA may not be used as collateral...

That actually means - the property she will purchase within her self-directed IRA may NOT have a mortgage.

However - that is possible to have that self-directed IRS will be a partners in the LLC - and another partner will contribute additional money.

Let me know if you want to consider that approach.

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Customer reply replied 29 days ago
is this a common approach, can a famly member be partner within the LLC to provide the balance amount as cash, like spouse?

First of all - using a self directed IRA is not very common....

But using a partnership as investment is ever less common.
You might want to communicate with the administrator (or prospective administrator) of her self directed IRA - as they may limit some investment options.

In general - ANY person or entity may be a partner.

That includes herself - she may be a partner and her self directed IRA may be another partner.

Complications will be that ALL distribution must be prorated exactly according to capital contributions to avoid prohibited transactions.

Another issue will be that the partnership will be required to file the tax return and issue K1 to reach partner.

Lev
Lev, Tax Advisor
Category: Tax
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Customer reply replied 29 days ago
thanks, ***** ***** helpful
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