Need Help With A Taking A Gain In My Roth--RIGHT BEFORE CLOSING
I'm selling a vacant lot to an investor -- all cash. I purchased this a few few months ago all cash as well.
I took title to it in a land trust, but never got my Mid Ohio IRAs involved during the actual purchase.
Now that I'm selling it this week, I want to take the gain in the IRA. I know there are issues to consider like self-dealing or doing business with my daughter's IRA.
Is there a way around it? ...
Can I simply have my daughter's IRA paid via a mortgage she puts against it? Title has already been run, but as long as the buyer is OK with paying off the mortgage instead of me will this be a way to cash out?
If the answer is not b/c she is my daughter, could I have done it if it was someone else? Thanks.
This is a question you should take to the IRA custodian.
Off hand, I would say that the sale of your property will be a taxable event. Giving your daughter's IRA a mortgage on the property does not give the IRA title to the property. Since you will be the seller regardless of who holds the mortgage, you will have a short term gain taxed at your ordinary income tax rate.
Just my opinion. Let us know if the IRA custodian comes up with a tax saving strategy other than a 1031 exchange.
In the meantime, explore with your tax advisor whether you qualify to use a 1031 exchange to defer capital gains taxes on your profit.
You are right in that my daughter's IRA would not have title, but does that mean the IRA has no right to have a lien on the property?
If Citibank were to issue a mortgage on the property, they wouldn't be allowed to get paid on it b/c they don't have title to it?
Please clarify. Thanks for the response.
Assuming your daughter's IRA custodian will allow it, the IRA could act as a banker when it lends money to refinance your property and receives a mortgage secured by the property.
Perhaps I misunderstood the intent of your original question. I thought you were really asking if doing so would avoid taxes on the profits from the sale. I am saying that your daughter's IRA would only have its loan paid off when the property is sold, but the profit on the sale would still be taxable to you -- the titled owner.
The answer to whether your daughter's IRA can become a lien holder on your property needs to be addressed to the IRA custodian.