Employee Benefits Blog

Posts tagged Individual retirement accounts

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IRS Eases Procedure for Late Qualified Plan and IRA Rollovers

Taxpayers who wish to transfer balances between IRAs and/or qualified retirement plan accounts can accomplish this on a tax-free basis either by making a direct trustee-to-trustee transfer between accounts or by making a qualifying rollover within 60 days. The Internal Revenue Service (IRS) has recently issued guidance that will make it easier, in many circumstances, for account holders to avoid a taxable distribution if they miss the 60 day deadline.

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UBI in IRAs and Qualified Plans from Partnership Investments Can Ba a Nasty Surprise

During this past tax filing season, we came across several instances where clients experienced unexpected tax return filing requirements and, in some cases, tax liabilities resulting from partnership investments within their individual retirement accounts (IRAs) and qualified retirement plans.  This post will explore some of the issues involved in these unpleasant situations.

In general, tax-exempt organizations are required to pay income tax on net unrelated business income (UBI), which generally means income derived from regular business activities that are unrelated to the organizations’ missions.  In addition, investment income derived from debt-financed investments is generally taxable as UBI.  When people think of “tax-exempt organizations,” they generally think of charities such as hospitals or schools.  However, the term also includes IRAs and qualified retirement plans, which therefore are also potentially subject to tax on UBI.

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Recent Tax Court Case Highlights Risk of Prohibited Transactions in IRAs

Last year, we posted about alternative investments, including active closely-held businesses, within individual retirement accounts (IRAs).  A recent United States Tax Court case, Peek and Fleck v. Commissioner, involved an investment in a closely-held business and illustrates the risk of running afoul of the strict rules governing prohibited transactions with IRAs.

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Use of Self-Directed IRAs for Alternative Investments

Clients regularly ask us questions regarding the use of self-directed individual retirement accounts (IRAs) for investments other than cash or publicly traded securities.  Examples of such investments include real estate and private equity investments.  While it may occasionally make sense to explore holding such investments in IRAs, there are many restrictions on such investments, and there are some potentially significant tax disadvantages in holding such investments in IRAs.  This post will briefly explore some of these issues.