While
there is great latitude in permissible assets in an IRA, there are some
restrictions. There are some assets
which are prohibited (such as art, antique cars, etc.) There are also prohibitions against
self-dealing (using IRA funds to purchase your home or borrowing money from
your IRA). There are some investments
which generate unrelated business taxable
income, or UBTI (income which is taxed to the IRA and again when the money
is withdrawn from the IRA). In addition,
one must realize that some “nonstandard” investments are illiquid; therefore,
how do you satisfy the required minimum distribution (RMD) amounts at age 70
and a half? While it is not our intent
to say “never”, it is our intent to caution IRA holders that improper investing
in an IRA can have severe and significant tax consequences.
Can I own real estate in my IRA? Perhaps.
If you can find a custodian willing to hold the real estate, you are not
engaged in self-dealing, and you have other IRA assets from which to take
required minimum distributions, then yes.
But be careful of any potential UBTI consequences.
Can I use my IRA assets to start a
business? Again, perhaps. This area is really complex. Realize that loses (as many startups do not
succeed) are not deductible in an IRA.
Also, a partial funding of the business with a loan for the balance is
not permissible.
We
at Paragon Financial Advisors will be happy to visit with you about any
non-standard investing; however any such investments should be discussed with
your tax counsel prior to
investing. If you have unanswered questions or need additional guidance please call
us. Paragon Financial Advisors is a
fee-only registered investment advisory company located in College Station,
Texas. We offer financial planning and
investment management services for clients.
