Think-Realty-Magazine-May-June-2016

debt-leverage (i.e., a mortgage) to purchase the IRA’s real estate, he or she may incur UBIT, or unrelated business income tax, on the debt-leveraged por- tion of the profits. However, once the account holders pay off their IRA’s loan and the debt ratio calculates to zero (by averaging the last 12 months), he or she will no longer have to pay UBIT on any of the profits. AVOID RECAPTURING DEPRECIATION Depreciation is an appealing tax in- centive for real estate investors and looks a little different inside an IRA versus outside an IRA. When you purchase property outside an IRA, depreciation is a tax-deferral mechanism in as much as you must pay tax on unrecaptured de- preciation of the property upon the sale of the home. A little-known detail about depreciation and debt-leveraged IRA real estate is your IRA can avoid paying tax on the depreciation that your IRA bene- fited from in prior years by paying off the loan 12 months prior to the sale. PLANNING FOR RMDS In terms of generational wealth, required minimum distribution (RMD) rules are important for investors to remember when planning for the future of their investments. If a Traditional IRA account holder wants to avoid chipping away at his or her account by taking RMDs after reaching 70.5 years of age, the account holder can make a Roth conversion before that time. However, he or she will have to pay taxes on the conversion amount, so account holders will want to consider their current tax rate before making this change. Roth account holders can liquidate or continue to rent or sell their IRA properties tax-free throughout the account holder’s lifetime without ever having to take an RMD. DON’T RELY ON SOCIAL SECURITY INCOME Social factors also play a role in retirement investors’ future planning. Social Security has been on a path of

decline, making it ever more critical for Americans to secure a second source of income for their retirement. Real estate can be a lucrative resource for investors to make money for their retirement years. Self-directed IRA real estate investing

is becoming more and more popular. While real estate is an asset that many account holders are familiar with, knowing and understanding the many distribution strategies associated with this investment can help investors make the most of their retirement. •

BY CLAY MALCOLM

Chief Development Officer Clay Malcolm oversees most avenues of marketing, teaches continuing professional education and informal classes and webinars, and facilitates the training of business development and client representative teams at New Direction IRA Inc., a self-directed IRA provider that assists more than 12,000 clients nationally. Malcolm, who has more than 20 years’ management experience in various roles draws upon his teaching background to develop the educational aspects of

New Direction IRA and impart knowledge about self-directed IRAs to its clients and prospective clients. Malcolm received his bachelor of science degree in communications from Northwestern University. 877-742-1270 | www.newdirectionira.com

ADVERTISER INDEX

American IRA, LLC The Entrust Group Equity Trust Company

21 19 4 29 7 15 11 40 13 25 33 33

We Close Notes Kingdom Trust Lasaii, LLC MidAtlanticIRA

Next Generation Trust Services North American Savings Bank Self Directed IRA Services, Inc.

Sunwest Trust Company uDirect IRA Services, LLC

MAY/JUNE 2016 39

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