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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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Tom W. Anderson

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. Mat has performed the impossible by effectively delivering complex information in an easily understandable manner for the layperson, while providing the necessary legal basis to suit the professional. Mat's book is a "must read" for investors, attorneys, CPAs, and other professionals and other interested individuals wanting to learn about all there is to know about Self-Directed IRAs.

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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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CEO, Polycomp Trust Company

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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.

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President, Polycomp Trust Company

Mark J. Kohler

Mat is truly an expert on self directed IRAs, and his book is the one book that every self directed IRA investor should read.

Mark J. Kohler
CPA, Attorney, Author

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I was referred to Matt for help in setting up an IRA owned LLC. Matt and his team did an incredible job completing the work in a few short days. The process was professional, efficient and cost effective. I continue to rely on Matt for guidance running the LLC and related real estate matters. Not only is Matt a good lawyer, he runs a great office. It is easy for me to recommend Matt and his team.

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Real Estate Broker & Investor

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Mathew is the legal partner for the majority of my clients. Matthew provides solid legal advice, precise strategic planning, appropriate corporate structure development, and is readily available to consult with his clients on all legal and business manners. Matthew is well respected and has an extremely large network in the successful real estate investor world. Matthew is reliable, professional and an all around great partner to have on your side

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CFO Consultant / Premier Accounting and Financial, Inc.

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I have retained Mathew Sorensen several times for multiple real estate deals and have been very pleased with his efforts and work product and will continue to use him in the future.

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Real Estate Investor

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My wife and I recently sought Mat's help with estate planning and couldn't have been more satisfied. Mat's professionalism, honesty, creativity and attention to detail is second to none. What impresses me the most about Mat can be summed up as "diverse". Mat's vast knowledge and experience in a plethora of differing areas of the law is astounding. I highly recommend Mat to my clients and friends seeking legal help.

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Owner / Creamer Insurance Agency, Inc.

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CFO / Authentic Property Investors

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Owner / Griffin Investment Properties

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Treasurer / Jacobs Construction, Inc.

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Mathew Sorensen is a great resource and I use him consistently for real estate law questions. He is a wealth of information and will always give you a great knowledge base. I have been using KKOS for a while now and am very impressed and happy with their services.

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CPA, Real Estate Investor

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[Mat] is completely devoted to his clients and continually strives to stay abreast of changes and updates in the law. Mat is an unbelievably hard worker and...I don't hesitate to recommend Mat's services to anyone as I know he will take care of them and give them simple, concise, and straightforward solutions to any legal issue they may be facing.

Kenneth P. Child
Chief Legal Officer / Stake Center Locating

K.M

I am a partner in a law firm in Chicago and I have worked with Mat on my personal real estate and business ventures. Mat has given me practical and wise advice which has helped me make profitable decisions. I highly recommend Mat.

K.M.
Attorney & Real Estate Investor

Gary Shumm

Mathew is an excellent attorney, well versed in the Self-Directed IRA market…His ability to distil 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. Anyone interested in this Self-Directed IRA Market would do well to connect with Mathew and learn from the best.

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Vice President / IRA Services Trust Company

Mat is truly an expert on self directed IRAs, and his book is the one book that every self directed IRA investor should read.

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CPA, Attorney, Author / MarkJKohler.com

"A must-read for any self-directed IRA investor."

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President / uDirect IRA Services

"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
President / Polycomp Trust Company

"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
Vice President / IRA Services Trust Company

"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

"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
CEO / Polycomp Trust Company

"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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