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Prohibited Transaction Law & Cases | IRA/LLC Structures, Laws & Cases | Leveraging Your IRA, UDFI Tax, Law & Cases | IRA Tax on Non-Passive Income, UBIT Tax Law & Cases | Real Estate Investments With IRAs | Private Company Investments With IRAs | Self-Directed IRA Basics | Advanced SDIRA Topics, Law & Cases

Private Company Investments With IRAs

Statutes 

IRC § 1361 (b)(1), IRS Letter Ruling 199929029, April 27, 1999. – The only restriction to company ownership for IRAs is that IRAs may not own shares of S corporations as an IRA does not qualify as an S corporation shareholder. 

IRC § 4975 (e)(2)(G) – An IRA should not invest into a company that is owned 50% or more by disqualified persons as to the purchase of stock or units would constitute a transaction with a disqualified person (the company) and would result in a per se prohibited transaction.

IRC § 4975 (c)(1)(F)If an IRA owner is part of management that runs the hedge fund or private offering company, then the investment from his or her IRA into the company that he or she (or other disqualified persons) manages may constitute a self-dealing prohibited transaction.

Notice 2004-8, Abusive Roth IRA Transactions states that specific structures whereby a Roth IRA owner corporation engages in transactions with the Roth IRA owner or other related parties. These transactions must be disclosed as a listed transaction by a Roth IRA owner via IRS form 8886.

15 U.S.C. 77d(6) – Section of the code regarding Crowdfunding. Self-directed retirement plans may invest into Crowdfunding offerings. 

IRC § 511 – Unrelated Business Income Tax (UBIT), which applies to the ordinary income (e.g. not passive) received by an IRA. 

IRC § 513 – Exemptions from UBIT tax. The following are exempt, real estate rental income, interest income, dividend income, royalty income, interest income.

PRIVATE COMPANY OWNERSHIP SUBJECT TO UBIT TAX

SUBJECT TO UBIT TAX

NOT SUBJECT TO UBIT TAX

Restaurant that is an LLC or other pass-through company.  Restaurant that is a C corporation and pays corporate taxes. 
Software company that is an LLC and sells technology services or products.  LLC or LP that owns rental property and receives rental income. 
Real estate development LLC who conducts non-passive real estate activities.  LLC or LP that lends money and receives interest income. 
Real estate company that consistently buys and sells real property on a short-term (less than a year hold) basis. LLC or LP that owns mineral or intellectual property and licenses it for royalty

Opinions and Notices

DOL Advisory Opinion 2000-10A – If a company is owned 49% or less by disqualified persons, then it is possible for the IRA to invest into the company as it is not a per se prohibited transaction, but such investment still must be analyzed to ensure that there is not a self-dealing prohibited transaction. 

DOL Private Letter Ruling 8009091 – If the IRA owner or a disqualified person is an officer, director, or highly compensated employee of a company where his or her IRA plans to invest, the IRA’s investment may constitute a self-dealing prohibited transaction if the IRA owner personally benefits in their officer or direction position by having his or her IRA invest. 

17 CFR 230.501 – Accredited investor – In order for an IRA to qualify as an accredited investor, the IRA owner must qualify.  1. Annual income of over $200,000 single, or $300,000 married, in each of the past 2 years. 2. Net worth in excess of $1,000,000, not including equity in investor’s personal residence. 

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President, RITA, and Founder and Vice Chairman / PENSCO Trust Company

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Mat's books is a great reference guide for self-directed IRA investing – Best I’ve seen in 30 years of being in the business.

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President, Polycomp Trust Company

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CPA, Attorney, Author

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Real Estate Broker & Investor

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Real Estate Investor

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CPA, Real Estate Investor

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Chief Legal Officer / Stake Center Locating

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Attorney & Real Estate Investor

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CPA, Attorney, Author / MarkJKohler.com

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"Mat's book is an excellent resource for self directed IRA owners and their advisors. It is the first of its kind in our industry.
Mat has truly written an“Authoritative Guide” for self directed IRAs."

Pamela Constantino

"Mat is an excellent attorney, well versed in the Self-Directed IRA market...His ability to distill the complexities of the Self-Directed IRA
so that the average person can understand them, and ensure that they don't get "tripped up" is second to none.

Gary Shumm

"Mat’s book is the most practical and comprehensive self directed IRA guide in our industry. Reading this handbook should be the first step for any alternative asset investor, investment sponsor, or trusted advisor that seeks to become informed about how to maximize the value of IRAs."

J.P. Dahdah

"Mat's books is a great reference guide for self-directed IRA investing – Best I’ve seen in 30 years of being in the business."

Harry Veldkamp

"The Self Directed IRA Handbook by attorney Mat Sorensen is the most comprehensive book ever written about one of the
best investment and retirement savings tools ever created: the Self-Directed IRA."

Tom Anderson
Founder and Retired CEO, PENSCO Trust Company

J.P. Dahdah

Mat’s book is the most practical and comprehensive self directed IRA guide in our industry. Reading this handbook should be the first step for any alternative asset investor, investment sponsor, or trusted advisor that seeks to become informed about how to maximize the value of IRAs.

J.P. Dahdah
CEO, Vantage Self Directed Retirement Plans

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