The IRS has always permitted an IRA holder to use their IRA for a real estate investment. A Real Estate IRA LLC is a special type of IRA that allows the IRA holder (you) to use IRA funds for a real estate tax-free and without custodian consent. With an IRA for real estate with checkbook control, one can gain control over his or her retirement funds so one can have the ability to make real estate and other investments tax-free and without the consent of a custodian. With a traditional Self Directed IRA, you as the IRA holder have the ability to direct the IRA custodian to make only certain financial related investments, such as stocks or mutual fund investment you wish to make using your retirement funds. Whereas, with a Real Estate IRA LLC with Checkbook Control, the IRA holder can use their IRA for real estate investments tax-free and without custodian consent.
The self directed IRA real estate LLC Structure is IRS and tax court approved. The idea of using an entity owned by an IRA to make investments was first reviewed by the Tax Court in Swanson V. Commissioner 106 T.C. 76 (1996). The Swanson Case was later affirmed by the IRS in Field Service Advice Memorandum (FSA) 200128011.
With a Real Estate IRA LLC, an IRA holder will never have to seek the consent of a custodian/financial institution to make an investment or be subject to excessive custodian account fees based on account value and per transaction.
With a self-directed IRA LLC, an IRA holder will gain checkbook control over your IRA funds so you can make real estate and other investments tax-free and without custodian consent.
The following are a number of the benefits of using a self-directed real estate IRA LLC:
“Checkbook Control”: With a Real Estate IRA LLC with Checkbook Control, as the IRA LLC manager (the IRA care of the custodian will be the owner/member of the LLC), you will no longer have to get each investment approved by the IRA custodian of your account. Instead, as manager of the self directed IRA LLC, all decisions are truly yours. To make a real estate investment, simply right a check and use the funds straight from your Self Directed IRA LLC bank account.
Invest in Real Estate & much more Tax-Free: With a self directed IRA LLC with checkbook control, you will be able to invest in real estate and much more tax-free and without the need to seek the consent of the custodian. In general, your only limit is your imagination. The income and gains from your real estate investment will flow back into your IRA tax-free.
Save Money with Lower Custodian Fees: With a self-directed IRA LLC structure, you will be in a position to save a significant amount of money on IRA custodian fees. With a Real Estate IRA LLC you no longer have to pay excessive custodian fees based on account value and transaction fees. Instead, with a self-directed IRA LLC, you will have the power to act quickly on a potential real estate investment opportunity. When you find a real estate investment that you want to make with your IRA funds, as manager of the Real Estate IRA LLC, simply write a check or wire the funds straight from your Self Directed IRA LLC bank account to make the real estate investment.
Tax Deferral: With the self-directed IRA LLC structure, all income and gains from your real estate investments will generally flow back to your IRA LLC tax-free. Because an LLC is treated as a pass-through entity for federal income tax purposes and the IRA, as the member/owner of the LLC, is tax-exempt pursuant to Internal Revenue Code Section 408, all income and gains of the LLC will generally flow-through to the IRA tax-free!