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World Markets to close? October 10, 2008

Posted by Jeff Nabers in : Health, Money, Personal Enjoyment , add a comment

In a Bloomberg article today, Italain Prime Minister Silvio Berlusconi said world leaders are considering the closing of world markets so they can rewrite the rules of how they work. He claims the solution can’t be for one country, but instead it must be global.

As terrorism and financial terrorism make us fearful enough to pass the Patriot Act and globalize world markets and power, a Benjamin Franklin quote comes to mind:

“Any society that would give up a little liberty to gain a little security will deserve neither and lose both.”

See the whole (more…)

Video: Self Directed Solo 401k July 31, 2008

Posted by Jeff Nabers in : Self Directed IRA Solo 401k , add a comment

I recently sat down with Eric Wikstrom – CPA, CFP, & Founder of Integrated Wealth Strategies.

In this segment we briefly discuss the Solo 401k and how it differs from a Self Directed IRA.

The following clip observes the benefits of unrestricted investment choices. (more…)

Loaning money to your IRA/401(k) May 20, 2008

Posted by Jeff Nabers in : real estate, Self Directed IRA Solo 401k , add a comment

Do you have an IRA/401k-owned investment property that has a mortgage and negative cash flow?

Something I’ve been running into lately is Self Directed plan investors who speculatively bought a house or condo in previously hot markets (think Vegas, Florida, Phoenix, etc). Some of these areas have experienced declining values and declining rental income for short term rental properties.

If your plan (IRA or 401k) bought a house & obtained a non-recourse mortgage loan qualified based on short term rental income that has declined, you probably have negative cash flow. How can you avoid foreclosure? Loan money to your IRA/401k.

Loaning money to your IRA or 401k

A little known (more…)

Prohibited Transaction Basics April 24, 2008

Posted by Jeff Nabers in : Self Directed IRA Solo 401k , 110comments

The most notable difference between endeavors down the path of using a self directed IRA versus traditional investing is the unique rules that apply to the former. The extremely simple rule is that an IRA (specifically) cannot buy life insurance or collectibles (such as rugs, works of art, alcohol, bullion).

The more involved rule is known as “no self dealing” and is described in Internal Revenue Code section 4975. This rule basically says that for each retirement plan/account, there is a list of “disqualified persons” with whom that plan cannot do business. These DQPs include:

  1. The accountholder/participant and any other fiduciary (person who makes investment decisions for the plan)
  2. Companies who provide services
  3. A member of the family of #1 or #2 above (family defined as spouse [husband/wife], ancestor [parents, grandparents, etc], lineal descendants [children, grandchildren, etc], and spouses of lineal descents)
  4. A corporation (or other entity) that is 50% or more owned (directly or indirectly) by #1, #2, or #3 above
  5. An officer, director, 10% or more owner, or highly compensated employee of #4 above.
  6. A 10% or more (in capital of profits) partner or joint venturer of #4 above

Every self directed IRA/401(k) investor should make this DQP list before making any investments.

Too many people seem to think of the list as only “the accountholder and his family”. As you can see it is a bit more involved than that. This doesn’t require calculus, but you should actually write out the list step by step to ensure that it is complete. This list can actually get quite extensive if you, your family member, or anyone who provides services to your plan has ownership in several companies.

So, what is a prohibited transaction?

In a nutshell, when a DQP transacts with a plan it is a prohibited transaction (abbr “PT”). The trick here is what is considered to be a “transaction”. This is generally defined in IRC 4975 as when one of the following happens between a plan and DQP directly or indirectly:

So I consider that to be the general rule. There are a couple of special rules and they (more…)