Promotional YouTube video (by Jonathan Cronin) explaining how to use an IRA to invest in real estate and convert positions at a "discount" to reduce taxable conversion amounts. The speakers describe legal/accepted valuation discounts applied when converting private real-estate interests: a 20–35% discount for lack of control and a 25–35% discount for lack of liquidity, and give a worked example where a $100,000 position can be discounted and taxed on roughly $49,000 instead of $100,000.
Questions this video answers
20–35% (depends on operating agreement and minority-member power).
25–35% (depends on expected illiquidity period of ~3–7 years).
Approximately $49,000 (after applying both discounts).
Chapters
What if I told you there is a way to invest in real estate and grow your wealth tax free and cut your tax bill by 50%? It's a proven strategy that high level investors use to legally protect their capital while scaling their portfolio. If you have an IRA and want to use it to invest in real estate, this is a must watch.
This is where I open up the.
Magic trick box and I go, how would you like to make money but pay even less in taxes?
Want to get this concept down, but.
You'Re going to say, I don't want.
To convert all $100,000 from traditional Roth.
Because I don't want to pay 28 to $33,000 in federal income taxes on that conversion. To which I'm going to say, no worries, my friend, no worries at all. Gotcha.
Because the IRS rules in a different.
Set of the book, in this massive.
Code book, allow for what we call discounting.
There's the word that every investor needs to write down. Discounting. We're not buying it at a discount, we're converting at a discount.
Now, there are some very well settled.
Established legal parameters on these conversions at a discount. And I'm going to walk through two of them.
The first is that there is a discount for the lack of control. So we see a discount ratio that.
Lack of control to be somewhere between.
20 and 35%, depending upon a host of variables, depending upon how slanted the operating agreement is in these deals and the more power that is retained by the managers and how little control that little minority member has.
Well, that means that if we take that discount and we apply it to the hundred thousand dollars, we've now discounted that $100,000 down to say $70,000. Because that's what an independent, reasonable third party person might pay for that position, given the lack of control. But wait, it gets better. You can get a second discount on top of the first discount.
That second discount is for a lack of liquidity.
Knew going into this deal that it.
Was going to be illiquid for three to five, maybe even seven years. But when we're converting it from trad to Roth, we can take that lack.
Of liquidity discount, which is in that range of 25 to 35%, and we can add it to the other discount. And so now that hundred thousand dollar conversion is taxed at $49,000.
I know that's great, I know that's fantastic right there.
