TR_October_2020

ENGAGEMENT

BUSINESS TIPS

EasyAnswers

TIPS FROM AN ATTORNEY TO PROTECT YOURSELF — AND YOUR INVESTMENT.

When it comes to your real estate investing business, asking questions is part of the job. Think Realty Resident Expert, real estate financial advisor, and attorney Clint Coons offers his advice and answers to questions he hears from clients every day.

Q: I amreal estate investor andmy company is an LLCw/ an S-corp. I invest in tax liens and deeds and I amplanning to open a Roth solo 401(k) and domyRE investing there. I am looking forways tominimizemy taxes by rolling over money frommyRoth solo 401(k) to a self- directed Roth IRAandwait five years before Iwithdrawthe amount.Will I be subjected to taxes and penalties?

A: Depends on whether you have maintained a Roth IRA for five years. To satisfy the penalty-free distribution, you must have maintained a Roth IRA for five years preceding the rollover and subsequent distribution. If you have not, then you must wait the requisite five years. Here is the great news: the portion of a non-qualified distribution from your Roth 401(k) account to your Roth IRA (contributions, not gain) is treated as basis in the Roth IRA. If a qualified distribution, i.e., you are over 59 1/2, from a designated Roth account is rolled over into a Roth IRA, the entire amount of the distribution will be treated as basis in the Roth IRA.

Have a legal, finance, or tax question that might affect your REI? Send questions to Think Realty’s editor at kwhite@thinkrealty.com.

24 | think realty magazine :: october 2020

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