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 tax-free! The IRS only describes the type of investments that are prohibited, which are very few.
The following are some examples of types of investments that can be made with your Self-Directed Roth IRA LLC:
- Residential or commercial real estate
- Domestic or Foreign real estate
- Raw land
- Foreclosure property
- Mortgage pools
- Private loans
- Tax liens
- Private businesses
- Limited Liability Companies
- Limited Liability Partnerships
- Private placements
- Precious metals and certain coins
- stocks, bonds, mutual funds
- Foreign currencies
The IRS permits using a Self-Directed Roth IRA LLC to purchase real estate or raw land. Real estate is the most popular investment made with a Self-Directed Roth IRA. Making a real estate investment is as simple as writing a check. Since you are the manager of your Self-Directed Roth IRA LLC, you have the authority to make investment decisions on behalf of your IRA. One major advantage of purchasing real estate with a Self-Directed Roth IRA is that all gains are tax-free and will not be subject to tax upon withdrawal or distribution. This is because unlike traditional IRAs, you are generally not subject to any tax upon taking Roth IRA distributions once you reach the age of 59 1/2.
For example, if you purchased a piece of property with your Self-Directed IRA for $75,000 and later sold the property for $150,000, the $75,000 of gain would generally be tax-free. Whereas, if you purchased the property using personal funds (non-retirement funds), the gain would be subject to federal income taxes and in most cases state income tax.
The IRS permits the purchase of tax liens and tax deeds with a Self-Directed Roth IRA LLC. By using a Self-Directed Roth IRA LLC to purchase tax-liens or tax deeds, your profits will grow tax-free!
More importantly, with a Self-Directed Roth IRA LLC, you, as the manager of the IRA LLC, will have “checkbook control” over your Roth IRA funds allowing you to make purchases on the spot without custodian consent. In other words, purchasing a tax-lien or tax deed is as easy as writing a check!
Loans & Notes
The IRS permits the use of Roth IRA funds to make loans or purchase notes from third parties. By using a Self-Directed Roth IRA LLC to make loans or purchase notes from third parties, all interest payments received would be tax-deferred until a distribution is taken (Traditional IRA distributions are not required until the Roth IRA owner turns 70 1/2). In the case of a Self-Directed Roth IRA LLC, all interest received would be tax-free.
For example, if you used a Self-Directed Roth IRA LLC to loan money to a friend, all interest received would flow back into your Roth IRA tax-free. Whereas, if you lent your friend money from personal funds (non-retirement funds), the interest received would be subject to federal and in most cases state income tax.
With a Self-Directed Roth IRA LLC you are permitted to purchase an interest in a privately held business. The business can be established as any entity other than an S Corporation (i.e. limited liability company, C Corporation, partnership, etc.). When investing in a private business using Roth IRA funds, it is important to keep in mind the “Disqualified Person” and “Prohibited Transaction” rules under IRC 4975 and the Unrelated Business Taxable Income rules under IRC 512. The retirement tax professionals at the IRA Financial Group will work with you to develop the most tax-efficient structure for using your IRA to invest in a private business.
Precious Metals & Coins
Internal Revenue Code Section 408(m) lists the type of precious metals and coins that are permitted investments using IRA funds:
- One, one-half, one-quarter or one-tenth ounce U.S. gold coins (American Gold Eagle coins are the only gold coins specifically approved for IRAs. Other gold coins, to be eligible as IRA investments, must be at least .995 fine (99.5% pure) and be legal tender coins.
- one ounce silver coins minted by the Treasury Department;
- any coin issued under the laws of any state;
- a platinum coin described in 31 USCS 5112(k) ; and
- gold, silver, platinum or palladium bullion (other than bullion that is made into a coin) of a certain fineness that is in the physical possession of a trustee that meets the requirements for IRA trustees under Code Sec. 408(a).
The Technical and Miscellaneous Revenue Act of 1998 allowed Roth IRA owners to invest their Roth IRA assets in certain platinum coins as well as certain gold, silver, platinum, or palladium bullion provided the coins are held in a financial organization.
The advantage of using a Self-Directed Roth IRA LLC with “checkbook control” to purchase precious metals and/or coins is that their values generally keep up with, or exceed, inflation rates better than other investments. In addition, the metals and/or coins can be held in the name of the LLC at a financial organization (at any local bank) safe deposit box eliminating depository fees.
The IRS does not prevent the use of Roth IRA funds to purchase foreign currencies, including Iraqi Dinars. Many believe that foreign currency investments offer liquidity advantages to the stock market as well as significant investment opportunities.
Purchasing foreign currency, such as the Iraqi Dinar, with a Self-Directed Roth IRA LLC is as easy as writing a check. As manager of the Roth IRA LLC, you will have “checkbook control” over your Roth IRA funds, providing you with the ability to make investments without requiring custodian consent. In addition, the foreign currency notes, including Iraqi Dinars, can be held in the name of the LLC at a financial organization (any local bank) safe deposit box eliminating depository fees.
By using a Self-Directed Roth IRA LLC to purchase foreign currencies, such as the Iraqi Dinar, all foreign currency gains generated would be tax-free!
Stocks, Bonds, Mutual Funds, CDs
In addition to non-traditional investments such as real estate, a Self-Directed Roth IRA LLC may purchase stock, bonds, mutual funds, and CDs. The advantage of using a Self-Directed Roth IRA LLC with “checkbook control” is that you are not limited to just making these types of investments. With a Self-Directed Roth IRA LLC with “checkbook control”, you can open a stock trading account with any financial institution and invest tax-free! By using a Self-Directed Roth IRA LLC, all income and gains will flow-through to your Roth IRA tax-free! Your investment opportunities are endless!