January 16, 2012 By Leave a Comment
401(k) Contribution Limits in 2012 Increase to $50,000 or $55,500 if over 50.
In 2012, the maximum solo 401(k) plan contribution limitation increase to $50,000 and $55,500 for plan participants over the age of 50.
Self-Employed Individual – Solo 401K Plan
IRA Financial group, the leading facilitator of Solo 401(k) Plans, expects string demand for Solo 401(k) plans in 2012 due to the increased annual contributions limitations.
In 2012, the maximum solo 401k plan contribution limitation will increase to $50,000 and $55,500 for plan participants over the age of 50.
For 2011, an individual under the age of 50 years old is eligible to make a maximum contribution into a solo 401K plan in the amount of $49,000. The amount is increased to $54,500 in the case of an individual over the age of 50.
In 2012, the maximum solo 401(k) plan contribution limitation will increase to $50,000 and $55,500 for plan participants over the age of 50.
Under the 2012 new Solo 401k contribution rules, a plan participant under the age of 50 can make a maximum employee deferral contribution in the amount of $17,000. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $50,000, an increase of $1,000 from 2011.
For plan participants over the age of 50, an individual can make a maximum employee deferral contribution in the amount of $22,500. That amount can be made in pre-tax or after-tax (Roth). On the profit sharing side, the business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including the employee deferral, of $55,500, an increase of $1,000 from 2011.
“Establishing a solo 401(k) plans offers a number of attractive tax, retirement, and investment advantages for the self-employed,” stated Adam Bergman, a tax attorney with the IRA Financial Group. “IRA Financial Group’s Solo 401K plan is easy to establish and requires very little administration,“ stated Mr. Bergman.
IRA Financial Group will take care of setting up the entire Solo 401k Plan. The whole process can be handled by phone, email, fax, or mail and typically takes between 2-10 days to complete. Our 401k experts and tax and ERISA attorneys are on site greatly reducing the set-up time and cost. Most importantly, each client of the IRA Financial Group is assigned a tax attorney to help with the establishment of the Solo 401k Plan.
The IRA Financial Group was founded by a group of top law firm tax and ERISA lawyers who have worked at some of the largest law firms in the United States, such as White & Case LLP, Dewey & LeBoeuf LLP, and Thelen LLP.
IRA Financial Group is the market’s leading “checkbook control Self Directed IRA Facilitator. IRA Financial Group has helped thousands of clients take back control over their retirement funds while gaining the ability to invest in almost any type of investment, including real estate without custodian consent.
To learn more about the IRA Financial Group please visit our website at http://www.irafinancialgroup.com
January 13, 2012 By Leave a Comment
Temporary relief for IRA owners who entered broker indemnification agreements
The article below is from Quincy Long’s blog IRAWebadvisor, Quincy Owns Quest IRA,Inc one of the fastest grow self directed IRA custodians in the Country. Quincy is the trusted goto guy for all things related to self directed IRA’s. He regularly gives presentations around the country on how to setup and use your self directed IRA, self direcetd roth ira, self directed HSA and solo 401(k) ‘s.
Quincy Says: As I predicted long ago, the IRS will not invalidate millions of IRAs because of the indemnification and cross-collateralization clauses in a typical brokerage style of IRA. In at least some brokerage accounts, the account agreement calls for the assets of the IRA to indemnify any other losses from individual accounts at that brokerage and vice versa. This of course has never been a problem with self-directed IRAs because we have no cross-indemnification clause. However, there were people who then used this to scare people into paying them thousands of dollars to apply for an individual prohibited transaction exemption. I maintained that if there was a problem with brokerage IRAs because of these clauses the solution would be a global solution in the form of a class prohibited transaction exemption, not an individual exemption for each IRA.
See below. Now the IRS has granted temporary relief from the scary scenario of a disqualified IRA simply for signing the typical brokerage account agreement in anticipation of a class exemption request expected to be submitted to the Department of Labor.
Make no mistake, this is big news in the IRA world. It is worthy of an article in any newsletter that is sent out, etc. While not a permanent solution yet, the light can be seen at the end of the tunnel and the immediate threat has been removed.
If you do not understand the background of this announcement and need any clarification, please feel free to contact me at Quincy@questira.com. Have a great day!
Temporary relief for IRA owners who entered broker indemnification agreements
Ann. 2011-81, 2011-52 IRB
IRS has provided temporary relief for IRAs where the owner has signed an indemnification agreement with a broker or other financial institution, or granted certain security interests in other accounts held by the institution, that may result in a prohibited loan transaction under Code Sec. 4975.
Background. If an IRA engages in a prohibited transaction under Code Sec. 4975, it ceases to be considered an IRA and loses its tax-exempt status. (Code Sec. 408(e)(2)) The direct or indirect lending of money, or other extension of credit, between a plan and a disqualified person is a prohibited transaction. (Code Sec. 4975(c)(1)(B))
For these purposes, a “plan” includes an IRA. (Code Sec. 4975(e)(1)(B)) The term “fiduciary” includes any person who exercises any discretionary authority or discretionary control over management of a plan, or who exercises any authority or control over management or disposition of plan assets. (Code Sec. 4975(e)(3)) A “disqualified person,” includes a fiduciary, and members of the family of a fiduciary. (Code Sec. 4975(e)(2))
Department of Labor (DOL) Prohibited Transaction Exemption 80-26– is a class exemption that permits interest-free loans and extensions of credit to a plan from a party in interest in instances in which the plan faces a temporary cash shortage. If certain requirements are met, these loans won’t result in a prohibited transaction.
Previous guidance. In ERISA Op Letter No 2011-09A, 2011, the Department of Labor’s (DOL’s) Employee Benefits Security Administration (EBSA) determined that where a broker required an indemnification agreement in order for an IRA owner to open a futures trading account in his IRA, Prohibited Transaction Exemption 80-26– was not available to save the agreement from being a prohibited loan under Code Sec. 4975(c)(1)(B).
Notably, EBSA found that granting the broker a security interest in the assets of the IRA owner’s personal accounts to cover the IRA’s debts to the broker would be akin to the IRA owner guaranteeing those debts. Thus, DOL concluded that the grant of the security interest in non-IRA assets would amount to a prohibited extension of credit under Code Sec. 4975(c)(1)(B) (see article in Federal Taxes Weekly Alert 11/19/2009).
Similarly, in ERISA Op Letter No 2009-03A, 2009, EBSA issued an earlier advisory opinion to this same requester holding that an individual’s grant to a brokerage firm of a security interest in the assets of the individual’s non-IRA accounts as a requirement for the individual’s establishment of an IRA with the broker would be a prohibited loan.
Now, EBSA has advised IRS that it is considering further action regarding these agreements (collectively known as cross-collateralization agreements), including consideration of a class exemption request expected to be submitted to EBSA.
Temporary relief. In response to these developments and pending further action by EBSA, IRS says it will determine the tax consequences relating to an IRA without taking into account the consequences that might otherwise result from a Code Sec. 4975 prohibited transaction from entering into any indemnification agreement, or any cross-collateralization agreement, similar to the agreements described in ERISA Op Letter No 2011-09A, 2011 and ERISA Op Letter No 2009-03A, 2009.
This relief is available only if there has been no execution or other enforcement under the agreement against the assets of an IRA account of the individual granting the security interest or entering into the cross-collateralization agreement. IRS advises that no inference with respect to the application of any Code section other than Code Sec. 4975 should be drawn from this announcement.
Quincy Long, Quest IRA,Inc
December 12, 2011 By Leave a Comment
USING IRA’S AND OTHER RETIREMENT ACCOUNTS TO BUY NOTES
he biggest hurdle to get over for note investors is the problem of the discount. For the most part, the note holder has done little or no due diligence before agreeing to carry the paper. Yet they expect the note buyer to ignore underwriting the risk by paying them “full price” for the note. I even had one seller who multiplied his payment ($475.57) times the number of remaining payments (113) and insisted he deserved $53,739.41 for his note. Obviously the concept of the Time Value of Money was simple beyond his understanding.
We have reasonable success in overcoming this objection by using the following in our marketing:
WE CAN PAY YOU FULL PRICE FOR YOUR NOTE, IF YOU WILL GIVE US A TIME CONSESSION ON SOME OF THE MONEY!
If I may digress for just a minute, we use a contract with local investors and or our IRA sources that do not require any personal liability on our part. The investor looks to the underlying collateral to make him/her whole in the event of default. Email me at hdvorken@wf.net and I will be glad to send you a copy of the contract without any cost. Make the subject FREE CONTRACT.
As you no doubt know, growth inside a retirement account is either tax deferred or if it is a ROTH, it is TAX FREE for ever. Since there is no tax, IRA owners will accept lower returns. Think of the low rates on TAX FREE municipal bonds. Look at the chart below:
Yield on the Note Tax Bracket Tax Bracket Tax Bracket
10.00% 28% = 13.89% 32% = 14.71% 35% = 15.38
In other words, if income taxes are involved, the yield has to be the greater amount in order to net 10%. One note of caution even though they might except less then 10%, never sell a note for a yield less then the note rate, as there could be a problem in the event of an early pay-off.
You find the following note:
| N | I | PV | PMT | FV |
| 240 | 10 | 80,000 | 772.02 | 0.0 |
16 payments have been made on time
| N | I | PV | PMT | FV |
| 224 | 10 | 78204.78 | 772.02 | 0.0 |
After a long discussion with the note seller, he admits that $37,500 would solve his problem. You offer to buy ½ of the note for ½ of the remaining payments. “I know you only need $37,500, but I’ll pay you $39,102.55. Will that be OK?”
| N | I | PV | PMT | FV |
| 112 | ?? | 39,105,22 | 772.02 | 0.0 |
I = 19.96
You offer an IRA a yield = to the note rate of 10.00% and they agree. You now have several choices
- Sell all the payments to the IRA and make $16,967.92
| N | I | PV | PMT | FV |
| 112 | 10 | 56,070.47 | 772.02 | 0.0 |
$56,070.47 – $39,102.55 = $16,967.92
- Keep $150 per month and make $6,073.68 up front and get $16,800 in payments over time.
Remember if you buy the note inside your own IRA, and then sell it to an investor, the profit goes NOT TO YOU, BUT YOU’RE IRA. If you buy the note and then flip it to someone else’s IRA, you can keep the cash flow and profits for yourself.
There is literally over a TRILLION Dollars in IRA’s Using these funds will make you more competitive in the note and real estate game.
Henry Dvorken
Article Source: http://www.courtmanmortgage.net/using-ira%E2%80%99s-and-other-retirement-accounts-to-buy-notes/
December 6, 2011 By Leave a Comment
Check Book Controlled IRA / LLC Is it a good idea?
Question: Quincy can you give us input on whether we need to set up an IRA LLC or is there a better entity for self directed IRA’s? Is selling interest in a LLC the best way to pool IRA money?
Answer: The question of whether to set up an LLC for a particular transaction or series of transactions depends on a lot of factors. For example, are you going to use the LLC for transactions on a regular basis, or is the LLC set up for a single transaction? What is the cost of setting up the LLC in the state where you are located? Are there any income or annual fees to maintain the LLC? How much will the LLC cost to set up and maintain? As I always say, “every port of refuge has its price.” You simply have to analyze the costs and decide whether or not it is worth forming an LLC for your anticipated investments. I have seen many people use trusts as a viable and less expensive alternative to LLCs, but once again there may be state law issues which affect your decision.
Another question is who will manage the LLC? Personally, I believe it is not a great idea for an IRA owner to manage an LLC which the IRA owns, for a lot of reasons. I understand that guidelines on IRA owned entities have been written by the Department of Labor and are under review by the IRS prior to being released sometime later this year. These guidelines will hopefully shed light on a lot of the issues facing IRA owned entities.
Another factor to be considered is whether or not the operation of the LLC will subject the IRA to Unrelated Business Income Tax (UBIT). If an IRA operates a business, either directly or through a non-taxable entity such as an LLC, the owing IRA will be subject to taxation and will need to file a Form 990T each year (unless that LLC elects to be treated as a C corporation for tax purposes). This may impact the return and complicate matters somewhat, but does not at all mean the project shouldn’t be considered (I have investments in my retirement plan that require me to file a 990T each year). It is conceivable or perhaps even probable that the continuous purchase and sale of notes in the LLC would cause the owning IRAs to owe UBIT, if that is your intent. You should note that no disqualified person (including, but not limited to, the IRA owners and their immediate familymembers) may receive any current benefit from the transactions engaged in by the LLC. For example, no commissions may be earned by any disqualified person for purchasing notes within the LLC.
The answer to your second question has significant Securities and Exchange Commission issues, so if you form an LLC and sell its shares you will want to be careful not to make it a “public” offering, or at the very least you should consult with a securities attorney prior to raising capital. A full discussion of the securities law implications is beyond the scope of a quick email, and is subject to who the members of the LLC are and how they acquire the membership interests. I have used both trusts and LLCs to accumulate funds for investments, but I have always dealt with immediate family members and close associates, not the “public.” I am not an expert on securities laws, I just know enough to be dangerous.
Of course you should also realize that any particular asset may be held directly by an IRA as opposed to owning the asset through an LLC. Depending on the complexity of the transaction and the volume of activity, direct ownership by the IRA or IRAs may be sufficient to meet your needs.
I apologize for the delay in answering your questions. If I can do anything for you, please let me know. Have a great day!
December 1, 2011 By Leave a Comment
Entrust Retirement Services, Inc. becomes Quest IRA, Inc.
The French classical author François de la Rochefoucauld once wrote “The only thing constant in life is change.” In our case, change has come to Entrust Retirement Services, Inc., and we are very excited about it!
So what has changed? First, our name will change from Entrust Retirement Services, Inc. to Quest IRA, Inc. as of December 1, 2011. This means that you should begin titling all of your IRA assets as follows beginning December 1, 2011: Quest IRA, Inc. FBO [Account Holder Name] IRA #[Account Number]. After December 31, 2011 we will no longer be able to process new investments titled in the name of Entrust Retirement Services, Inc.
Please notify everyone involved with your current IRA assets of the name change and ask them to update their records. This may include persons who make payments to your IRA on a monthly basis, vendors, partnerships, limited liability companies, and any assets for which the name can be updated without an undue burden on you. Effective December 1, 2011 please make all checks payable to Quest IRA, Inc. Please note that you are not required to re-title assets such as real estate, deeds of trust or mortgages, or other recorded assets. Our tax identification number will not change, as this is only a name change and not a separate new company.
Second, as of January 1, 2012 we will no longer be affiliated with The Entrust Group, Inc. The decision to separate from The Entrust Group franchise system was reached by a mutual agreement between Entrust Retirement Services, Inc. and The Entrust Group, Inc. We feel that operating independently will allow us to achieve more efficiency in our processes and improve customer service. For example, all checks and wires will be issued out of Icon Bank of Texas, a local Houston bank, instead of out of California. Additionally, our marketing efforts will no longer be restricted to the state of Texas as they generally have been in the past. There will be many improvements to our systems over time, and we ask for your patience during this transition. Our new website will take some time to fully implement, but our staff will be here to assist you and get you what you need, including forms or account statements.
Third, we have updated all of our 5305 Custodial Account Agreements. Enclosed you will find the new 5305 which governs your account with us. An updated Fee Schedule is also enclosed, with some minor changes and updated disclosures. The changes to your 5305 Custodial Account Agreement and the Fee Schedule will apply to your account as of January 1, 2012.
What has NOT changed is our commitment to great customer service. The same staff that you already know will be here to serve your needs, and new staff will be added as we make the transition into an independent company. Additionally, the custodian for your account, First Trust Company of Onaga (FTCO), is not changing. The only change involving the custodian is that we will have a direct relationship with FTCO as a third party administrator instead of operating through The Entrust Group.
Also enclosed is our annual request for Fair Market Valuation, which is required by the Internal Revenue Service. Please complete the form and return it to us with substantiation attached by no later than January 16. 2012. More information about the fair market value requirement is available on the attached instruction letter.
Thank you again for the opportunity to serve your retirement account needs. We appreciate your business, and look forward to serving you for years to come. Please do not hesitate to call us if you have any questions.
Sincerely,
H. Quincy Long President
