Monday’s Supreme Court decision (click here to see the news that forced this decision) creates an excellent way for brokers to launch discussions with clients on using IRA funds for real estate buys. The unanimous ruling, voiced by Clarence Thomas, shields Individual Retirement Account assets when investors file for bankruptcy. This makes IRA investments in real estate now far superior to 1031 exchanges. Agents now can advise clients that IRA financing is the best way to secure real estate assets if they were to fall on hard times.
IRAs and Real Estate Q&A
Q: “I have a client who wants to invest in property using her IRA. Her accountant is telling her that it can't be done. Would you know of any accountants in the Portland, Oregon, area that may be able to help her in her quest?” – Brett Williams, RE/MAX Equity Group
A: I’ve heard this several times before from investors. The concept isn’t currently taught in most CPA training programs – though it’s certainly one that has enough interest that we might see it offered soon. Your client could also buy her accountant a copy of “IRA Wealth,” which should make him/her comfortable with the necessary paperwork. If that doesn't work, here are three accountants that I know of in the Vancouver/Portland area looking to add clients with IRAs in non-traditional investments like real estate. Geoffen, Mesher & Co.888 S.W. Fifth Ave., Suite 800, Portland, OR 97204 Phone: (503) 445-3368Accountant: Michael Lortz (Real estate tax is a genre he’s starting to specialize in, and he’s very interested in helping clients through the IRA investment process. He’s been with the firm three years since college graduation and has three years with another CPA firm while in school.) Reinhardt Henderson & Co.4800 S.W. Griffith Drive # 350, Beaverton, OR 97005-4735 Phone: (503) 641-2600Services: Consulting, Individual Tax, Business Tax, Bookkeeping, Estate Planning, Payroll.Description: Local CPA firm catering to the small business owner with five highly experienced CPAs. It prepares corporate, partnership and trust tax returns as well as individual. Caley & Associates, PC 2102 E. McLoughlin Blvd., Vancouver, WA 98660Phone: (360) 695-0065Accountant: Jim Holder, or any senior certified accountant, can assist with specific IRA investment/paperwork questions – Jennifer Meacham Dirks, co-author of “IRA Wealth” Send your question to jd@thewritersgroup.cc and yours may be the next question answered here. |
IRA assets could still be tapped for seizure if they’re not “reasonably necessary for the support of the debtor and any dependent.” But given that IRAs are inherently for retirement, a time when money is theoretically no longer coming in, this appears to still provide plenty of protection. If you’re interested, here’s the complete ruling in printable form.
In other news…
The National Association of Realtors’ newest study found that 23 percent of all homes
purchased in 2004 were for investment, reports RisMedia.com. That’s a rise of 14.4 percent over 2003 (1.80 million verses 1.57 million). Vacation homes made up another 13 percent. That’s 19.8 percent higher than in 2003 (1.02 million versus 850,000). Investment property buyers typically bought their first property at age 47, while vacation home buyers typically bought when they were 55.
2005 marks the first year taxpayers are allowed to take tax-free cash out of a property exchange, reports Tom Kelly of Inman News.
“New guidelines were adopted that would allow investors who kept their home and used it as a rental property (under IRS Code 121) to eventually ‘buy down’ and take cash out of the deal without facing federal income tax liability,” reports Kelly. “This money, known as ‘boot’ in tax circles, previously had come with a tax tag. The new rule, which enables taxpayers to combine Code 121 with the popular Code 1031 for tax-deferred exchanges, is retroactive to Jan. 27, 2005.”
Though this would have no effect on real estate held within an IRA (since that has to be non-owner-occupied), it is a valuable rule you should know when comparing investment vehicles.
I’ll be in touch when I hear of anything else that might be immediately helpful to you.
All my best,
Jennifer Meacham Dirks
Business Journalist
Phone: (360) 521-9908 E-mail: jd@thewritersgroup.cc
Co-author, “IRA Wealth: Revolutionary IRA Strategies for Real Estate Investment” (Square One Publishers, New York)
“IRAs and investment properties” is sent to you by request each month from:
The Writers' Group
3527 N.E. 15th Ave., #141
Portland, OR 97212
To unsubscribe to "IRAs and investment properties" simply reply to this e-mail with "Unsubscribe" in the subject line.