Owning Real Estate in an IRA
Owning real estate in a self-directed IRA can seem like a great way to save for retirement. However, I have found that most clients want to structure the ownership and/or management of the real estate in such a way that they will run afoul of the prohibited transactions rules. Once they learn of the restrictions involved, they are not so keen on the idea. Real estate or business ownership in an IRA can work, but knowledgeable tax counsel should be consulted. Many attorneys and CPAs are not familiar with the laws regulating self-directed IRAs.
Check out this article by Lynn O'Shaughnessy: Sweat Equity in IRA Real Estate can be no-no
I read the article 4 weeks ago. The article is negative for the most part. It assumes that the gentleman in the article who purchased real estate inside his IRA is likely to wind up in an IRS audit if he did any maintenance on the property or put his own sweat equity into the property. But, that is spectulative rhetoric being that we don't know if he did or didn't. Quote: "I don't know what happened to the ambitious investor."
I guess day traders ought to stop day trading their self directed IRAs personally or maybe they don't sweat at all.
She goes to outline the prohibitive IRA transactions fairly well and the article is a keeper for reference material as far as that goes.