Before reading this blog, please do not take offense to the subject. Although using a Self Directed IRA is simple and easy, the establishment of a true self directed IRA with checkbook control should be accomplished with the assistance of a tax professional. Using a Self Directed IRA with checkbook control is a tax retirement strategy that will allow an individual with retirement funds to get access and take control over their retirement funds to make traditional as well as non-traditional investments such as real estate tax free and without custodian consent.
The Self Directed 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 Self Directed 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.
So How does it Work?
With a Self Directed IRA with Checkbook Control, a special purpose limited liability company (LLC) is formed. The LLC should be formed by a tax professional because there are a number of items that must be properly included on the Articles of Organization. The IRA care of the IRA custodian would be the member (owner) of the LLC and the IRA holder would serve as the manager of the LLC.
With a Self Directed IRA LLC with “checkbook control” you no longer have to pay excessive custodian fees based on account value and transaction fees. Instead, with a checkbook control IRA, your retirement funds would be transferred tax-free to a new IRA custodian who would then the funds tax-free to a new IRA LLC bank account. The custodian in the “checkbook control” Self Directed IRA LLC structure is referred to as a “passive” custodian largely because the custodian is not required to approve any IRA related investment and simply serves the passive role of satisfying IRS regulations. By using a Self Directed IRA LLC with “checkbook control” you can take advantage of all the benefits of self-directing your retirement assets without incurring excessive custodian fees and custodian created delays.
With a checkbook control IRA, as manager of the LLC, you will have the authority to make investment on behalf of your Self Directed IRA LLC. The Investment must be made in the name of your Self Directed IRA LLC. All income and gains generated by your IRA LLC will generally flow back to the IRA tax-free!
To learn more about the advantages of using a Self Directed IRA with checkbook control please contact an IRA Expert at 800-472-0646 or visit www.irafinancialgroup.com.