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Directed IRA Podcast
Open Forum: Listener Questions Answered!
Aug 29, 2024
Dive into a lively Q&A where listeners uncover the secrets of self-directed retirement accounts and Solo 401(k) plans. Discover how to leverage IRA funds for real estate investments while navigating the complexities of taxes and capital gains. Learn about managing Required Minimum Distributions in multi-member IR LLCs and explore investment options for starting a business with old 401(k) funds. Packed with expert insights, this discussion highlights the intricacies of retirement planning and investment strategies!
39:19
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Quick takeaways
- Leveraged real estate investments within IRAs can trigger significant tax implications due to Unrelated Debt Financed Income (UDFI) rules.
- Contributions to retirement accounts must be in cash, not property, necessitating the sale of assets to generate eligible funds.
Deep dives
Understanding UDFI and Leveraged Real Estate Investments
Leveraging IRA funds for real estate investments can lead to tax implications due to Unrelated Debt Financed Income (UDFI). When investors use debt to finance a percentage of their property, taxes must be paid on the gains attributed to that debt upon sale. For instance, if an investor purchases a $100,000 property with a $40,000 down payment and a $60,000 non-recourse loan, the IRS classifies 60% of any gains as taxable due to UDFI. Understanding the calculations involved, such as how much gain is subject to taxes, is vital for investors considering leveraged real estate purchases within their retirement accounts.
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Discover
highlights
Listen to the best highlights from the podcasts you love and dive into the full episode