I have contacted several IRAs custodians during last 5 years and nobody could explain to me how to open self directed IRA account so my IRA could buy properties and didn’t pay taxes on profits because I had Roth Self Directed IRA. I would guess custodians didn’t want to provide this information for several reasons:
1. It’s easier for them and less expensive when a person has cash sitting on their account than reviewing the paperwork that investors send to a custodian that custodian has to approve and send the funds, etc.
2. Maybe custodians use cash that sits on their accounts from investors and invest it somewhere else. It’s probably illegal for them to do that but we don’t know what we don’t know.
3. They don’t want to take responsibility explaining to investors how to set up the structure of the self directed IRA account so investor could use the funds and make profit and not pay taxes on it. Maybe IRS has some influence on custodians, because if everybody could use their savings, make profit and not pay taxes on the profit, it would hurt uncle SAM.
Ron Legrand nailed it explaining how everything supposed to be set up. I met Ron 1st time in 2008 and still think that he is THE BEST real estate investors’ educator.
Watch this video if you don’t want to pay taxes on your profits. Please consult your own CPA.
Pavel Sakurets has been investing in commercial and residential real estate since 2001. More than 2000 real estate transactions have been completed by him including rehabs, rentals, sheriff's sales, redemptions, mortgage notes, foreclosures, etc. He is a licensed real estate broker and building contractor in MN. Holds MBA in real estate and finance from the University of St Thomas