The Self-Directed Roth IRA LLC “Checkbook Control” Structure has been in use for over 30 years. The notion of using an entity owned by an IRA to make an investment was first reviewed by the Tax Court in Swanson V. Commissioner 106 T.C. 76 (1996). In Swanson, the Tax Court, in holding against the IRS, ruled that the capitalization of a new entity by an IRA for making IRA related investments was a permitted transaction and not prohibited pursuant to Code Section 4975. The Swanson Case was later affirmed by the IRS in Field Service Advice Memorandum (FSA) 200128011.
In FSA 200128011, the IRS, in providing guidance to IRS agents for purposes of conducting audits, confirmed the Tax Court’s holding in Swanson and held that a newly established entity owned by an IRA and managed by the IRA owner is permitted to make investments using IRA funds without violating the prohibited transaction rules under Internal Revenue Code Section 4975.
A Self-Directed Roth IRA LLC offers one the ability to use his or her retirement funds to make almost any type of investment on their own without requiring the consent of any custodian or person. Tired of being forced to invest in stocks or mutual funds? Have an investment opportunity, such as real estate or a business investment that you would love to make with your IRA funds? Then the Self-Directed Roth IRA LLC is your solution.
In addition to the tremendous Roth IRA benefits (tax-free profits, asset protection and estate planning), the Self-Directed Roth IRA LLC allows you to invest tax-free in investments that you know and understand. Aside from life insurance, collectibles and certain “prohibited transaction” investments outlined in Internal Revenue Code Section 4975, a Self-Directed Roth IRAs can invest in most commonly made investments, including real estate, private business entities, public stocks, private stocks, and commercial paper.
Read More: What is a Self-Directed IRA LLC?
The Roth IRA
In 1997, Congress, under the Taxpayer Relief Act, introduces the Roth IRA to be like a traditional IRA, but with a few attractive modifications. The big advantage of a Roth IRA is that if you qualify to make contributions, all distributions from the Roth IRA are tax-free – even the investment returns – as long as the distributions meet certain requirements. In addition, unlike traditional IRAs, you may contribute to a Roth IRA for as long as you continue to have earned income (in the case of a traditional IRA, you can’t make contributions after you reach age 70 and 1/2).
For additional information, you can find the rules for the Roth IRA in the Internal Revenue Code under Section 408A.
What is a Roth IRA?
A Roth IRA is an IRA that the owner designates as a Roth IRA. A Roth IRA is generally subject to the rules for Traditional IRAs. For example, traditional and Roth IRAs and their owners have identical rules. These rules treat an IRA as distributing its assets if the IRA engages in a prohibited transaction or the owner borrows against it. The reporting requirements for IRAs also apply to Roth IRAs. However, several rules, which we describe below, apply uniquely to Roth IRAs.
The most attractive feature of the Roth IRA is that even though contributions are not deductible, all distributions, including the earnings and appreciation on all Roth contributions, are tax-free.
Roth IRA Characteristics
The following is an overview of the tax characteristics of the Roth IRA
Contributions are not Tax-Deductible
- Unlike a Traditional IRA, an individual does not need to take an income tax deduction for their Roth IRA contributions. All Roth IRA contributions are made with after-tax dollars. In other words, the amount of the contribution is treated as basis in the IRA.
Earnings are Tax-Free
Earnings and gains from a Roth IRA are tax-free and may be tax-exempt under certain conditions. What this means is that all income and gains are Roth IRA investment isn’t subject to income tax.
The attraction to the Roth IRA is because distributions that qualify for Roth earnings are completely tax-free. As long as certain conditions are met and the distribution is qualified. First, establishment of the Roth IRA must surpass five years. Additionally, the Roth IRA owner is over the age of 59 and 1/2. The Roth IRA owner will never pay tax on any Roth distributions they receive.
The Self-Directed Roth IRA LLC structure has become a popular choice for gaining total investment control (“checkbook control”) over IRA funds and making investments tax-free. In each case, a limited liability company (“LLC”) is established that is owned by the IRA account. And it is managed by the IRA account holder. The IRA Holder’s IRA funds are then transferred by the Custodian to the LLC’s bank account, providing the IRA holder has “checkbook control” over his or her IRA funds.
The IRA Financial Group was founded by a group of top law firm tax and ERISA professionals. Members of our team have worked at some of the largest law firms in the United States, including White & Case LLP and Dewey & LeBoeuf LLP. We have helped thousands of clients take back control over their retirement funds. More importantly, they gain the ability to invest in almost any type of investments.
With IRA Financial Group’s Self-Directed Roth IRA LLC Structure – you can:
- Use your retirement funds to invest in real estate and much more, tax-free
- Gain control of your retirement funds
- Pay no tax on distributions
- Access your retirement funds to make the investments you want when you want
- Help grow your retirement funds tax-free
- Make investments quickly without delay
- Make investments without requiring custodian consent
- Save on high annual custodian fees
- Enjoy tax benefits generated by using a Self-Directed Roth IRA LLC
- Diversify your portfolio by investing in cryptocurrencies, real-estate, hard-money loans, Gold, and other alternative investments.
- Purchase a vacation home in or outside of the United States with Roth IRA funds and move in tax-free at age 59 1/2
- Purchase a retirement home in or outside of the United States with Roth IRA funds and move in tax-free at age 59 1/2
- Purchase an office building with Roth IRA funds and then use the building for your own business after you turn 59 1/2
- Purchase a rental property which generates rental income and gain use of those funds tax-free
- Invest in precious metals and then take possession of the metals once you reach the age of 59 1/2
- Invest in tax deeds and then take possession of the property personally once you reach the age of 59 1/2
- Invest in a distressed property – generate large gains and then withdraw the funds tax-free for personal use upon reaching the age of 59 1/2
- Invest in an investment fund – generate large gains and then withdraw the funds tax-free for personal use upon reaching the age of 59 1/2
- Work directly with Ira Financial Group’s retirement tax professionals to establish an IRS compliant structure that works best for you and your investment goals
- Transfer your existing Roth or traditional IRA into a Self-Directed Roth IRA LLC
- Transfer your simple IRA into a Self-Directed IRA LLC.
Read More: Benefits of a Self-Directed IRA LLC
Our Self-Directed Roth IRA LLC Establishment Service Includes:
- Free tax consultation with our IRA Specialists
- Setup your LLC in the State of your choice
- Prepare and file the Articles of Organization with the State
- Generate a special purpose, IRA Custodian approved Self-Directed Roth IRA LLC Operating Agreement
- Generate a special purpose, IRA Custodian approved Subscription Agreement
- Obtain the EIN from the IRS
- Co-ordinate setup with the Custodian of your Choice
- Free tax and IRA support
- Direct access to our on-site retirement tax professionals
- No annual fees
- Satisfaction Guaranteed!
The IRA Financial Group will take care of the entire setup of your Self-Directed Roth IRA LLC “Checkbook Control” structure. We can handle the entire process by phone, email, fax, or mail. This typically takes between 7-21 days to complete, however the timing largely depends on the state of formation and the custodian holding your retirement funds. Our IRA retirement tax experts are onsite greatly reducing the setup time and cost.
Most importantly, each client of the IRA Financial Group gets their own retirement tax professional to help with the establishment of the Self-Directed Roth IRA LLC “Checkbook Control” structure. Our fee is much less than most companies that provide the same or similar services. You’ll see the difference right away.
Did you know?
A Self-Directed IRA LLC structure can involve pretax and Roth IRA funds.