A Real Estate also called a Self Directed IRA LLC with checkbook control or a Self Directed IRA LLC is an IRS approved structure that allows one to use their retirement funds to make real estate and other investments tax-free and without custodian consent. The IRA Real Estate Self Directed involves the formation of a limited liability company (“LLC”) that is owned by the IRA and managed by the IRA holder (i.e. you) or any third-party. As manager of the IRA LLC, you will have checkbook control over the IRA assets to make the investments you want and understand when you want, such as real estate, not just investments forced upon you by Wall Street.
The Real Estate IRA Checkbook Control Structure has been an established retirement solution for over 15 years. The notion of using a special purpose 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.
Since 2001, the Real Estate IRA LLC Checkbook Control structure has become the investment vehicle of choice for investors looking to use retirement funds to make real estate, precious metals, and other investments tax-free and without custodian consent. In addition, the Self Directed IRA Checkbook Control structure will allow one to get control over his or her retirement funds. Accordingly, each time an IRA investment is made, the IRA holder will have the ability to simply write a check or wire the money straight from the IRA LLC account to make the investment. No longer will the IRA holder be required to seek the consent and approval of the IRA custodian before making an Investment.
With a Self Directed Real Estate IRA, 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 Checkbook IRA LLC, simply write a check or wire the funds straight from your Self Directed IRA LLC bank account to make the investment. The IRA Self Directed Real Estate allows you to eliminate the delays associated with an IRA custodian, enabling you to act quickly when the right investment opportunity presents itself. In addition, with the IRA Self Directed Real Estate structure, all income and gains from IRA 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 of the LLC, is a tax-exempt party pursuant to Internal Revenue Code Section 408, all income and gains of the IRA Real Estate Self Directed LLC will flow-through to the IRA tax-free!