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New Ruling Expected to Increase Popularity of DISC Roth IRA Tax Strategy

Appeals Court in Summa Holdings affirmed use of having commissions from domestic international sales corporation go to a Roth IRA

IRA Financial Group, the leading provider of self-directed IRA retirement solutions, believes that the Sixth Circuit Appeals Court decision which held that using a DISC and Roth IRA strategy for their congressional-sanctioned purposes—tax avoidance was permissible will increase the popularity of the domestic international sales corporation (“DISC”) Roth IRA strategy. The Sixth Circuit in Summa Holdings, Inc. Vs. Commissioner of Internal Revenue reversed a previous Tax Court ruling (Summa Holdings Inc. v. Commissioner, T.C. Memo 2015-119) that disallowed a domestic international sales corporation Roth IRA strategy. “The Summa case solidifies the right of a taxpayer to structure a transaction to minimize taxes with in itself is not enough to label the transaction as a sham or lacking economic substance,” stated Adam Bergman, a partner with the IRA Financial Group.

In Summa the owner of a closely held export company would transfer money from the company (Summa Holdings) to a DISC (JC Export), as the statute encourages, and pay some (or all) of that money as a dividend to its shareholders (JC Holding, which was wholly owned by the Roth IRAs), allowing the money to enter the Roth IRA and grow there tax-free. The IRA account holder would have to pay the high unrelated business income tax—here roughly 39%—when the DISC dividends go into the IRA, but all remaining funds would be able to stay in the self-directed Roth IRA and grow tax-free.

According to Mr. Bergman, “at this time it is unclear whether the IRS or Department of Justice will appeal. However, what is clear is that the Appeal Courts decision could help many exporters devise a tax friendly strategy for shifting taxable commission income to a Roth IRA.”

The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.

IRA Financial Group is the market’s leading provider of self-directed IRA LLC and Solo 401(k) plans. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.

To learn more about the IRA Financial Group please visit our website at https://www.irafinancialgroup.com or call 800-472-0646. To learn more about establishing a self-directed IRA account with the IRA Financial Trust Company please visit http://www.irafinancialtrust.com or call 800-472-1043.

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