Avoiding the 60-Day IRA Rollover Requirement

If a taxpayer takes money out of their retirement account, they generally have to pay income tax on the amount distributed. What if the taxpayer wants to put the money back into the account? There have been several examples where Congress has allowed taxpayers to put money back into their accounts. The recent CARES Act…Continue readingAvoiding the 60-Day IRA Rollover Requirement

Big Tax Savings With ESOP, But Requires Work

An employee stock ownership plan (ESOP) can produce significant income tax savings. This tax savings isn’t exactly free. One has to keep up with the ESOP and the relevant rules to ensure that the tax savings are achieved. This compliance work is required and failure to comply can be costly. The recent Ed Thielking v.…Continue readingBig Tax Savings With ESOP, But Requires Work

Early IRA Distribution, Gambling Not a Disability

Early distributions from IRAs are subject to a 10 percent additional tax.  The 10 percent additional tax does not apply if the distribution is taken when the IRA owner is disabled.  The recent Gillette v. Commissioner, T.C. Memo. 2018-195, case addresses whether medically-induced compulsive gambling qualifies as a disability. The Facts & Procedural History The taxpayer-wife is a…Continue readingEarly IRA Distribution, Gambling Not a Disability

Establishing Tax Basis in IRA Contributions

Contributions to IRAs are deductible.  If not deductible, the taxpayer has basis in his IRA so that this amount is not taxable when taken out of the IRA.  The idea is that the taxpayer probably paid income taxes on the money prior to putting it into the IRA and should not be taxed on it…Continue readingEstablishing Tax Basis in IRA Contributions

Tax Court Says Royalties Paid to Roth IRA Were Excess Contributions to IRA

The U.S. Tax Court recently issued another opinion involving a LLC owned by a self-directed IRA. The case is Block Developers, LLC v. Commissioner, T.C. Memo. 2017-142. The case invovles an IRA LLC that purchased a patent and then licensed the patent back to the prior owner, with the intent of the IRA LLC collecting…Continue readingTax Court Says Royalties Paid to Roth IRA Were Excess Contributions to IRA

Appeals Court Upholds IC-DISC Roth IRA Tax Strategy

The Sixth Circuit Court of Appeals upheld the IC-DISC Roth IRA tax strategy in In Summa Holdings, Inc. v. Commissioner, No. 16-1712 (2017). This tax strategy allows business owners to sidestep the annual Roth IRA contribution limits, thereby allowing the taxpayers to amass sizable amounts in their Roth IRAs to grow tax-free. The case is…Continue readingAppeals Court Upholds IC-DISC Roth IRA Tax Strategy

Using IRA Funds to Settle a Probate Dispute

Inherited IRAs can present a number of challenges. In Ozimkoski v. Commissioner, T.C. Memo. 2016-228, the court considered the tax implications of a withdraw from an inherited IRA that was used to settle a probate dispute with the couple’s son. The case shows what not to do when using IRA funds to settle a probate…Continue readingUsing IRA Funds to Settle a Probate Dispute

LLC Owned by Self-Directed IRA Cannot Pay Wages

The U.S. Court of Appeals for the Eleventh Circuit recently affirmed Ellis v. Commissioner, which held that the payment of wages for services to a self-directed IRA owner for his services rendered to an LLC owned by a self-directed IRA was a prohibited transaction. This case provides yet another example of how not to handle…Continue readingLLC Owned by Self-Directed IRA Cannot Pay Wages

Self-Directed IRA Purchase of Real Estate is Taxable

Self-directed IRAs present a number of opportunities.  But what if the self-directed IRA custodian chooses to limit the account holder’s options?  Can the IRA account holder go around the custodian’s wishes?  The recent Dabney v. Commissioner, Docket No. 14566-12, provides an example where the purchase real estate by a self-directed IRA was a taxable distribution from…Continue readingSelf-Directed IRA Purchase of Real Estate is Taxable