Level 3

IRA's as Partners in an LLC

Forum|Forum|6 years ago
March 13, 2020
2 replies
8 views

Situation: Client opens an LLC, one partner is a Roth IRA and the other partner is a traditional IRA.

I've not prepared a partnership return with other than Individuals as partners.

Want to clarify how to enter the partner information.

Thanks

This topic has been closed for replies.

taxshack

Level 6

You would enter them on the K-1 worksheet according to entity type. I haven't ever had to do this, so I'm not sure what the entity type is.

You want to do your research and make sure your client is following the rules for his self-directed IRA's. He cannot personally have any involvement in the running of the partnership that his IRA's are invested in. There are very strict rules and I have found most people who have approached me with self-directed IRA's don't follow them. That's why I haven't personally dealt with it.

Preparing taxes is not my life, but my life is amazing because I prepare taxes.

BobKamman

Level 15

Taxshack is right. I would do a return for someone who just got off a plane from Beijing by way of Rome, before I did a return for someone with a self-directed IRA owning real estate. And a partnership between two IRA's? Make sure you get paid with two checks from the respective trustees.

C

ClarissaAuthor

Level 3

Hilarious reply. 🙄

Client is a long time repeat customer. Concerned that he may have been misled. I am definitely treading cautiously.

M

Mark11_2

Level 2

List the partner as an exempt organization. Make sure you enter the Unrelated Business Taxable Income calculation, UBTI. Tell your client, in writing. that they should be using a management company so they do not have to perform any services for a rental held in an IRA. The rest is as normal

BobKamman

Level 15

I wouldn’t call the IRA trustee an “exempt organization.” The instructions are unclear, but they do say “If the partner is a nominee, use one of the following codes after the word “nominee” to indicate the type of entity the nominee represents: I—Individual; C—Corporation; F—Estate or Trust; P—Partnership; DE—Disregarded Entity; E—Exempt Organization; IRA—Individual Retirement Arrangement; or FGOV—Foreign Government.”

The trend has been for the real estate to be placed in an LLC, with the IRA trustee as its (nominee?) owner. Since there are two different EIN’s and presumably just one trustee for both halves, is that what was done? I don’t think you’re using the trustee’s EIN.

You really don’t want to do this return, do you?

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