IRA ACCOUNTS

Hi Randy
I looked on the irs.gov web site and found a little bit. i don't know if any of this even relates to what you are needing to do though?
The Goverment really ties a elderly person down so they cannot profit on anything in their life. I hope you find a way for your dad to do this.
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Prohibited Transactions

Generally, a prohibited transaction is any improper use of your traditional IRA account or annuity by you, your beneficiary, or any disqualified person.

Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendant, and any spouse of a lineal descendant).

The following are examples of prohibited transactions with a traditional IRA.

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Borrowing money from it.
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Selling property to it.
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Receiving unreasonable compensation for managing it.
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Using it as security for a loan.
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Buying property for personal use (present or future) with IRA funds.

Fiduciary. For these purposes, a fiduciary includes anyone who does any of the following.

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Exercises any discretionary authority or discretionary control in managing your IRA or exercises any authority or control in managing or disposing of its assets.
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Provides investment advice to your IRA for a fee, or has any authority or responsibility to do so.
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Has any discretionary authority or discretionary responsibility in administering your IRA.

Effect on an IRA account. Generally, if you or your beneficiary engages in a prohibited transaction in connection with your traditional IRA account at any time during the year, the account stops being an IRA as of the first day of that year.

Effect on you or your beneficiary. If your account stops being an IRA because you or your beneficiary engaged in a prohibited transaction, the account is treated as distributing all its assets to you at their fair market values on the first day of the year. If the total of those values is more than your basis in the IRA, you will have a taxable gain that is includible in your income. For information on figuring your gain and reporting it in income, see Are Distributions Taxable , earlier. The distribution may be subject to additional taxes or penalties.

Borrowing on an annuity contract. If you borrow money against your traditional IRA annuity contract, you must include in your gross income the fair market value of the annuity contract as of the first day of your tax year. You may have to pay the 10% additional tax on early distributions, discussed later.

Pledging an account as security. If you use a part of your traditional IRA account as security for a loan, that part is treated as a distribution and is included in your gross income. You may have to pay the 10% additional tax on early distributions, discussed later.

Trust account set up by an employer or an employee association. Your account or annuity does not lose its IRA treatment if your employer or the employee association with whom you have your traditional IRA engages in a prohibited transaction.

Owner participation. If you participate in the prohibited transaction with your employer or the association, your account is no longer treated as an IRA.

Taxes on prohibited transactions. If someone other than the owner or beneficiary of a traditional IRA engages in a prohibited transaction, that person may be liable for certain taxes. In general, there is a 15% tax on the amount of the prohibited transaction and a 100% additional tax if the transaction is not corrected.

Loss of IRA status. If the traditional IRA ceases to be an IRA because of a prohibited transaction by you or your beneficiary, you or your beneficiary are not liable for these excise taxes. However, you or your beneficiary may have to pay other taxes as discussed under Effect on you or your beneficiary , earlier.

Exempt Transactions

The following two types of transactions are not prohibited transactions if they meet the requirements that follow.

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Payments of cash, property, or other consideration by the sponsor of your traditional IRA to you (or members of your family).
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Your receipt of services at reduced or no cost from the bank where your traditional IRA is established or maintained.

Payments of cash, property, or other consideration. Even if a sponsor makes payments to you or your family, there is no prohibited transaction if all three of the following requirements are met.

1.

The payments are for establishing a traditional IRA or for making additional contributions to it.
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The IRA is established solely to benefit you, your spouse, and your or your spouse's beneficiaries.
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During the year, the total fair market value of the payments you receive is not more than:
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$10 for IRA deposits of less than $5,000, or
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$20 for IRA deposits of $5,000 or more.

If the consideration is group term life insurance, requirements (1) and (3) do not apply if no more than $5,000 of the face value of the insurance is based on a dollar-for-dollar basis on the assets in your IRA.

Services received at reduced or no cost. Even if a sponsor provides services at reduced or no cost, there is no prohibited transaction if all of the following requirements are met.

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The traditional IRA qualifying you to receive the services is established and maintained for the benefit of you, your spouse, and your or your spouse's beneficiaries.
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The bank itself can legally offer the services.
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The services are provided in the ordinary course of business by the bank (or a bank affiliate) to customers who qualify but do not maintain an IRA (or a Keogh plan).
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The determination, for a traditional IRA, of who qualifies for these services is based on an IRA (or a Keogh plan) deposit balance equal to the lowest qualifying balance for any other type of account.
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The rate of return on a traditional IRA investment that qualifies is not less than the return on an identical investment that could have been made at the same time at the same branch of the bank by a customer who is not eligible for (or does not receive) these services.

Investment in Collectibles

If your traditional IRA invests in collectibles, the amount invested is considered distributed to you in the year invested. You may have to pay the 10% additional tax on early distributions, discussed later.
Collectibles. These include:

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Artworks,
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Rugs,
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Antiques,
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Metals,
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Gems,
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Stamps,
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Coins,
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Alcoholic beverages, and
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Certain other tangible personal property.

Exception. Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins, or one-ounce silver coins minted by the Treasury Department. It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion.

Excess Contributions

Generally, an excess contribution is the amount contributed to your traditional IRAs for the year that is more than the smaller of:

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$5,000 ($6,000 if you are age 50 or older), or
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Your taxable compensation for the year.

This limit may be increased to $8,000 if you participated in a 401(k) plan maintained by an employer who went into bankruptcy in an earlier year. For more information, see Catch-up contributions in certain employer bankruptcies earlier.

The taxable compensation limit applies whether your contributions are deductible or nondeductible.

Contributions for the year you reach age 70½ and any later year are also excess contributions.

An excess contribution could be the result of your contribution, your spouse's contribution, your employer's contribution, or an improper rollover contribution. If your employer makes contributions on your behalf to a SEP IRA, see Publication 560.

Check with Chip & Andrea. They had done it. I'm checking into this myself.

take a look into self-directed ira accounts. we just opened an account but have yet to use it. you can rollover all or part of your current traditional ira and use it to invest in real estate with out penalties and taxes there are restictions as with anything. but check into it we set up our account with Equity Trust

Maybe I didn't explain myself to good. It is his account, I have a house that I got for 25k going to sell to him for 35k Have person ready to buy for 47k owner financing 2k down at 12% for 15 years, That makes payments of approx 540.00 month. A total of 98k in 15 years. I was trying to find a way to do this so it wouldn't mess up his social security, He also has a good retirement plan. As of right now he is 72 and still has 200k in his account. This could be real costley if not done right.

Randy

I would like to think everyone for their response, I know I will find the right answer if I stay with it. All replies are greatly appreciated.

Thanks Everyone
Randy

Go to Guidant Financial and check out their Self Directed IRA's that you can use to direct your money into the checking account of your own LLC.

http://www.guidantfinancial.com/

I know htis is a very old topic but htis should help anyone looking to tap into their own 401k without penalty.

Good Luck,

Greg

www.reepllc.net