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ROTH + LLC Business Structure?? Utah

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  • ROTH + LLC Business Structure?? Utah

    I am a newbie on this board. Please bear with me. During the present tax season, it has become apparent that I need to change my financial environment. My situation is that I am retired and have a significant amount tucked away in IRAs and a 401(k). The RMD associated with these tax-deferred accounts (on top of the other sources of my retirement income) pushes me into a higher tax bracket than I am comfortable with. And my current living expenses do not require as much income as is generated by the RMD. I would like to roll-over a portion of the IRAs into a ROTH self-directed IRA so that I have the option of tailoring my future distribution to fit my needs rather than be restricted to the IRS RMD payout schedule. In evaluating this possibility, I have located several mentions on the web of using a SMLLC in conjunction with a self-directed ROTH IRA. This structure is intriguing to me because I would like to use the self-directed IRA to invest in real estate (I used rental real estate during my working years to ameliorate the amount of tax that I had to cough up, I have some expertise in the area). The problem is that the self-directed IRA requires a custodian to administer the account,and the day-to-day overseeing of real estate is too intensive for such a remote-control arrangement. I would like to form an LLC , sell the entire ownership interest, as an investment,to a (my own) self-directed ROTH. The LLC would be free to conduct day-to-day business, and the ROTH, being the single member owner, would be accounted the profits in a tax-deferred entity. The problem is that I am having a difficult time getting my head around the nuances of this business structure, and have the following questions. Any identification of fatal flaws,comments on the feasibility of the structure, or suggestions of other ways to accomplish the stated goal will be greatly appreciated.
    Business Plan:
    1.Rollover existing IRA funds into a self-directed ROTH IRA (and pay the thus precipitated taxes).
    2.Form a SMLLC with me as member-manager.
    3.“Sell” the LLC to the ROTH account as an “investment”, thus “funding” the LLC with cash to purchase real estate.
    4.Conduct LLC business (to the day I die, and, of course, through an independent and separate bank distinct from my personal finances).
    5.Use the ROTH as a traditional IRA as far as beneficiaries, distributions, etc are concerned.

    1.After forming a SMLLC, I am the single member and owner. As such I would normally report the business results on Schedule C of my personal annual Fed Tax filing. But after “selling” the LLC to the ROTH, would it not be the second member of a (??)single member LLC? Or would IT become the single member, and I would be an employ or something (which would probably require that I receive a taxable salary)?
    2.Another possibility is that the LLC be formed as a multiple member LLC with me and the ROTH as the two and only members. But then how do I account the business between me and my “tax-deferred partner”?
    3.When I “sell” the LLC to the ROTH, is that a personal capital gain for me (on which I would pay yet another tax on top that of the conversion)?

    I anxiously await some insight to this situation, and thanks everyone in advance.

  • #2
    YOu are close in yor thoughts

    I teach what you are trying to do at seminars and guide individuals through the process using Roth IRAs to fund LLCs to buy investmnets ( R.E., Oil & Gas Etc.). While I do not suggest you have to attend our next seminar ( Atlanta, 3/30), you can e mail me and I will give you a few moments of my time. If you want to retain my services..we will take it from there.
    G. Cornell, Esq
    Include your name & cintact info. in e mail


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