Discussion:Self-Directed IRA owning S-Corp
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Discussion Forum Index --> Tax Questions --> Self-Directed IRA owning S-Corp
| 18 September 2009 | |
| Hi everyone!
I have a client that has an LLC doing service-based business and they want to make an election to be taxed as an S-Corporation. The problem is that one of the partners is a self-directed IRA (set up as an LLC). I see a lot of articles online that say you cannot do it but nobody sites a source. Form 2553 instructions are vague in this sense and the only source cited online is Pub. 590 pages 40-41, but there is nothing there about the subject. Can anyone offer any insights on where I can get a credible substantiation? IRS website is not helpful. Any help is appreciated. | |
| 18 September 2009 | |
| Try this link. It may point you in the right direction. http://www.journalofaccountancy.com/Issues/2009/Sep/20091923.htm | |
Me and the Boss (talk|edits) said: | 18 September 2009 |
| You know, it is just kind of sad to see what people are doing with what is supposed to be their retirement money. It is, in my opinion, not a very good plan for folks who are recently out of a job and want to be their own dang boss. They are eyeballing their former employer's 401(k) as a source to finance their new business venture. There are several web presences that claim to show you how to take your old 401(k), roll it into a self directed IRA and finance your new "next big thing." The prohibited transaction rules were put there for a reason, folks. Even if you can finesse you way around constructive distributions, early withdrawal penalties and prohibited transactions, you are risking your last safety net to take your one shot at a small business,or worse yet, a "franchise opportunity." Good luck with that... Whenever I can, I try to lead people toward other means of financing, or at least figuring out a cheaper way to start up without putting all their resources at risk. | |
| 18 September 2009 | |
| You're right, MeATB. But someone made a bundle convincing people to buy real estate inside their IRA (and we saw how well that worked), so now they've got to have something else to make money advising (until the next bubble). | |
