Who’s Got Your Back?

A large number of prospective clients in the last few months have mentioned how difficult it is to find someone who can adequately answer their questions regarding the CheckBook IRA structure. If they try to lay out a possible transaction, or ask for some guidance on how to structure a deal, all they get is a sales-pitch.

I received a call last night from a retired labor lawyer in Florida. Being a lawyer, he was particularly interested in the legal narrative of the structure, so I spent over an hour answering his questions. He told me he had called several other companies, and had not been able to find anyone who could adequately go through the legal history of the CheckBook IRA.

He said he’d been put in touch with salesmen when talking to other companies, and it seemed as if they had a 3×5 card in front of them with a sales pitch and a few facts. When he asked questions regarding certain transactions or State LLC requirements, he was met with “Well, we’ll have to get back to you on that one”, or “I’ll have to put you in touch with X, our in house guru. When can I schedule a call between you two?”. Near the end of our conversation, this gentleman said “Of all the companies I’ve called, you guys are the only ones who know what the heck you’re talking about.”

This post is not meant as a pat on the back, so much as it is a warning to those who are toying with the idea of setting up a CheckBook IRA LLC. While the legality of this structure has been set in stone for nearly 16 years, there are rules that must be followed, and when you’re doing the research you must be sure that you are talking with someone who can answer your questions knowledgeably and honestly; not only before the setup, but afterwards as well. The last thing you want is someone who just wants to put another notch in their sale belt.

We have no salesmen here, at CheckBook IRA. When you call, you will talk to me or my father. Between the two of us, we have nearly 20 years of experience using the CheckBook IRA LLC structure with our own money. Throw in the thousands upon thousands of people we have talked to, all of our clients spread out all over the US and the world, and the tens of thousands of transactions we’ve reviewed over the years, and its safe to say we’ve seen pretty much everything there is to see when it comes to the IRA LLC structure.

Our job is to educate you; to explain the concept, how it works, how it is set up. To answer any questions relating to investments you might have in mind, and to answer them honestly.

Beyond that, our job is also to be here for you after we set you up. As you begin to use this structure, you will have questions. Questions about whether or not a transaction is prohibited, questions about annual filings, questions about how best to structure a deal so that it isn’t taxable, etc…

When those questions pop up (and they will), you’d better make sure you have access to someone who can give you clear guidance on what needs to be done and how.

So, if you want to speak with someone who actually knows what the heck they’re talking about, give us a call.

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4 Comments

Lascar Anderssen on January 4, 2013 at 12:04 am

Jordan, thank you for very helpful articles about IRA LLC.

I’m curious as far as losses and business expenses (especially the manager’s salary) of such an LLC, which usually flow through to the member’s tax return. How are these handled under IRA ownership? Are they declared somewhere or providing valuation number to custodian is sufficient?

Thank you.

CheckBook IRA - Jordan on January 4, 2013 at 12:20 am

Hi Lascar,

We don’t suggest the Manager take a salary from the LLC, although there is disagreement on that issue in this industry. Based on our own reading of the code, private letter rulings, DOL advisory letters, and advice from counsel, its pretty clear to us that taking a salary would constitute a transaction between the LLC and the IRA owner, and would therefore be prohibited.

Regarding the losses and business expenses, none of those are taxable events when they occur in an IRA owned LLC (so long as the LLC is not engaged in anything that would trigger UBTI). As a result, there is no need to keep track of them in a tax context, as you would if the LLC were owned by you personally. Records of those expenses and losses should be kept at the LLC level of course, but they wouldn’t figure into anything that is tax related. In the absence of UBTI (Unrelated Business Taxable Income), no tax return is needed, and any losses or expenses would be kept track of internally, but would not figure into any tax return.

Thanks for the question.

Lascar Anderssen on January 4, 2013 at 2:17 am

Thank you, Jordan. Great info

If you don’t mind, here’s another question

How this SD IRA and the LLC it owns would be treated in case of a divorce? Let’s assume a court orders 50/50 split of all assets?

I’d appreciate your insight.

CheckBook IRA - Jordan on January 4, 2013 at 6:17 pm

I am entirely unfamiliar with divorce law, but in my experience with clients, generally if a court orders a 50/50 split, the two parties go to mediation to work out who gets what. In this case, everything revolves around the IRA, as whoever owns the IRA, necessarily owns whatever the IRA owns.

I’m not sure how much help that is 🙂

Lascar Anderssen on January 4, 2013 at 12:04 am

Jordan, thank you for very helpful articles about IRA LLC.

I’m curious as far as losses and business expenses (especially the manager’s salary) of such an LLC, which usually flow through to the member’s tax return. How are these handled under IRA ownership? Are they declared somewhere or providing valuation number to custodian is sufficient?

Thank you.
- CheckBook IRA - Jordan on January 4, 2013 at 12:20 am
  
  Hi Lascar,
  
  We don’t suggest the Manager take a salary from the LLC, although there is disagreement on that issue in this industry. Based on our own reading of the code, private letter rulings, DOL advisory letters, and advice from counsel, its pretty clear to us that taking a salary would constitute a transaction between the LLC and the IRA owner, and would therefore be prohibited.
  
  Regarding the losses and business expenses, none of those are taxable events when they occur in an IRA owned LLC (so long as the LLC is not engaged in anything that would trigger UBTI). As a result, there is no need to keep track of them in a tax context, as you would if the LLC were owned by you personally. Records of those expenses and losses should be kept at the LLC level of course, but they wouldn’t figure into anything that is tax related. In the absence of UBTI (Unrelated Business Taxable Income), no tax return is needed, and any losses or expenses would be kept track of internally, but would not figure into any tax return.
  
  Thanks for the question.
Lascar Anderssen on January 4, 2013 at 2:17 am

Thank you, Jordan. Great info

If you don’t mind, here’s another question

How this SD IRA and the LLC it owns would be treated in case of a divorce? Let’s assume a court orders 50/50 split of all assets?

I’d appreciate your insight.
- CheckBook IRA - Jordan on January 4, 2013 at 6:17 pm
  
  I am entirely unfamiliar with divorce law, but in my experience with clients, generally if a court orders a 50/50 split, the two parties go to mediation to work out who gets what. In this case, everything revolves around the IRA, as whoever owns the IRA, necessarily owns whatever the IRA owns.
  
  I’m not sure how much help that is 🙂