How to Use an IRA to Fund a Business (2019) with Mark J Kohler & Mat Sorensen | Live Stream

Hey everybody, Mark Kohler here for your weekly dose of amazing tax information. I was able to recruit right here. This is my amazing law partner, Matt Sorenson, who's the co host of the best tax and legal podcast in America is Taking it by storm. Refresh your wealth. You're going to want to get that. We're going to put down the link below, but Matt's my co host on our weekly podcast. But I'm here every week with my amazing partner and publisher of two of my books. A third book coming out this year on taxes, legal planning, Living the American dream. And today we're going to talk about how can I self direct an ira? Can my IRA help me in my business? Can I invest my IRA in someone else's business? All the above. Something Wall street does not want you to know. That's why I titled this what Wall street isn't telling you. That's what we're going to talk about today. Also, if you can deal with this, if you can be patient through this, this broadcast, we're going to do some drawings first. I'm going to pose a question in one more second here. And whoever answers first wins this copy of the book. This is Matt Sorenson, second edition, the self directed IRA handbook. Will you sign it for him?

I'm going to sign it. I'll even write a cute little note.

Yeah, I think they appreciate that. Okay then, if you share this broadcast, Darcy is going to choose two random winners of the Tax and Legal Playbook and Business Owner's Guide to Financial Freedom. So we're going to give away some books. We're going to the winner that answers this question. You ready? You want to pose the question?

Yeah. The question is how much can you put into your kids Roth Ira? How much amount. How much can you put in your kids? Roth IRA in 2019. 2019.

2019. Roth IRA contribution. The first person to answer that wins the book. Okay, now we're going to dive into this and for those that have been on our podcast before, ladies, you want me to move closer? Is this good? We're good. Ok. All right. We're going to use the whiteboard Matt even has. He's even. He's even. You're armed and ready. Okay.

But I do have terrible handwriting. So that's just a disclaimer. Want to let you know that. And I also want to warn you. Yes. You are watching two tax lawyers right now.

Yep.

So we're on YouTube live and on Facebook live. And again, I'm Mark Kohler, a CPA and attorney, author of those wonderful books I just showed you. And this is Matt Sorenson, tax attorney and the nationwide specialist in self directing ira. So you got the best here. If you want to pose a question, pose it below. Nancy's going to holler out. Now here's what, let's set the table.

Again.

Many of you know we're going here, you're going to put your operations over here, you're going to put your assets over here, your business. Some of you have an llc, that's cool. Some of you are a sole proprietorship and you're just getting going. Ultimately you're going to be an S Corporation. 90% of our clients that run operational businesses. This is Internet sales commissions, 1099, fixing and flipping real estate, selling a product, selling a service, any of those. This is your ordinary income. Many of you have a business that may be in startup phase and you're kind of here getting things going. But then you're going to graduate to the S Corp. Now ultimately you might set up a 401k which you can self direct, which is part of this whole conversation or you have an old IRA and you want to take this IRA and maybe invest it in business. Now we really want this conversation to be question driven. So if any of you are like what? Okay, we want you to pose it. But Matt, why don't you start out and tell people what can they do with this IRA to invest in business in general.

Let me say first, some people listening, you may have your own retirement account and I want to talk to you about how you can invest your own retirement account off Wall street because you can use your own retirement account to invest in a small business, to invest in your friend's company, to invest in a startup, to buy real estate. You don't have to buy stocks, bonds and mutual funds. You can buy these alternative investments, so called alternative and but I also want you to think about if you are a business owner, what do you need to grow money? Where's all the money at? It's in retirement accounts in the us. Other people have these retirement accounts that could be investing into your business. There's $28 trillion, $28 trillion in retirement accounts in the U.S. that is the most investable section of money, period. The only time I say that word trillions is when I'm talking about this topic. So it's a big number. And think about it to yourself too. Like if you're trying to raise money and you're out there, you're trying to grow your business or startup, you need 100 grand, 200 grand, a million, whatever it may be, and you're talking to your friends and family. Is it likely they have money in a savings account? Maybe. Do they have maybe a little more money in an IRA or an old 401k? They could invest in the business.

Okay.

That's how I want to set.

Are you done? Are you done? I don't know.

I think.

I doubt.

Okay.

I can sometimes go for a long time.

All right, you got to cut us off here. Okay. Now, I like what you just said. Matthew said. Two different worlds. Investing your IRA or getting money in your business from IRAs, other people's IRAs. Why don't we talk about investing your own IRA first? Now, many of you that are younger, you may not have started a Roth ira or a 401k or a traditional IRA yet. Hey, that's cool. Some of you have it. Just. You want to learn this, because this is going to be a huge part of your equation. So, Matt, what are some basic things that I could do with my ira? And I'll draw one right while you talk. Okay.

You mean boring things.

No, something cool.

Something cool.

Okay.

All right.

You can buy real estate with your ira.

So I take my ira, and then I can form an llc, and my LLC can buy a rental property?

Heck, yes, it can.

Okay. What else can my IRA do?

Your IRA could invest in a small company, a privately held company.

Okay. So some friend could have a business, and your IRA could be a partner in their business. Yep.

The cash partner throws in the money. You got stock or some ownership in the company.

They could do Internet sales. They could do commission racehorses, Buy and sell super bowl tickets, whatever. So you're doing business, and your IRA gets a percentage of their overall company profit.

You could be the bank with your ira. We have a lot of people who do that. They'll take their IRA and they loan it to other people.

Loans.

Maybe it's against a piece of real estate to someone that's fixing and flipping property. Maybe it's to a business owner and it's secured against equipment or assets they're going to buy with it. And you're playing the bank, you know.

All right, I'm going to ask the first question now, by the way, Nancy, do we have a winner of our. What's some of the answers?

We have 2,000, 6,500 thousand.

Okay.

We have.

Tashiki said $2,000. That is wrong. I am sorry. You can put in even more.

2000 is the coverdell Education Savings Account.

That's right. You may have thinking of the covered LRA, which can also be self directed. Someone said 6000. Who was it?

We have the first one. We have several people that says who's the first one?

When you're ready, write it down. Okay, I'm going to pose a question for everybody here. The answer was $6,000. We're going to find out who the winner was. That was first in our lineup.

That was the correct answer.

That was the correct answer. Okay. Some people ask, well, if my IRA buys a rental property, who gets the profit? Well, your IRA does because the IRA owns it, not you. Your IRA also, Matt, can they live in that rental property? No.

So remember, this is for investments. This is an investment strategy. You're building long term wealth. Think of like your ira, you could go buy Facebook stock, okay? You could go buy for 100 bucks a share and maybe it goes up and you sell it for 150 bucks a share. You have a dollar fifty per share gain. Now if you did that in your ira, one of the cool things about an ira, you don't pay tax. When you, you sell assets and make money in your retirement account, right? That's one of the great benefits. You get the same deal on real estate. If I bought a property for $100,000 in my IRA, I sold it for $150,000. That profit goes back into my IRA, no taxes.

Okay, Now I want to give you a cool example too. First, our winner is Emmy. The answer was you can put up to $6,000 in your kids IRA this year. Roth IRA. Now that has to be earned income. I've got other videos on, on how to put your kids on payroll in your business. Go watch them. But you're going to have to personalize this for Emmy.

There you go.

That is Emmy's copy right there. All right, now I want to give an example. Let's say you want to invest in a VRBO Airbnb. Some of you have stayed at an Airbnb or VRBO. Well, what's cool is you can form an LLC and you can have your IRA, your kid's Roth account, your spouse's 401K. You can have an HSA. You can have a covered out IRA. Where do you stop? I mean, these are all retirement accounts. They could all put in a little bit of money. You can go buy a rental property. The bank will even loan you money to go buy the rental property. Your credit doesn't even matter. It's called a non recourse loan. And the bank loans, money. You go buy a VRBO in San Diego, start written out that bad boy, all the profit goes into the LLC and you split it up in all the retirement accounts. Folks, that's called self directing. And you can do it tomorrow. Crazy question.

Perfect time for question. I'm not sure if it's locked down or locked, but he says, say I own 100k stock. Can I magically transfer those funds to my IRA without a tax?

Okay, our lock says he's got a hundred dollars, one hundred thousand dollars of stock in his Iraq and he wants to know how to self direct it. Matt, let's diagram. Why don't you walk them through it? So we've got an ira. Let's assume it's at Merrill Lynch. So Merrill Lynch. Okay, keep going.

All right, now step one is you're gonna sell the stock and get it to cash. Okay?

Okay, so now we have sale.

Okay, now you got $100,000 cash in the IRA. Step two is now when you call Merrill lynch and you say, Merrill Lynch, I want to invest in this private company or I want to buy this real estate or this LLC Mark was talking about. Merrill lynch is going to say, no, you can't do that right now.

It's not that you can't do it, it's that Merrill lynch won't let you do it. Okay?

Unless you're an ultra high net worth client, has $50 million or more assets, they don't let you do this. Okay, but that's just because Merrill lynch doesn't let you do it. It's like I tell people, it's like you're at the wrong place. It's like you're at Arby's asking for a chalupa. Okay? You can eat chalupas. You're just at the wrong place.

Arby's doesn't do chalupas.

They do not. Roast beefs, curly fries, sauce. Okay, but. Okay, but Merrill lynch, keep listening to us. They're a financial institution. What do they sell? Financial products. What do you have to buy with your retirement accounts at Merrill Lynch? What they sell. Okay, so you need to move that IRA from Merrill Lynch. You just move it to an IRA custodian who lets you self direct. These are called Self directed IRA Custodian. Okay?

Now this is a nice opportunity, I apologize to give a shameless plug to our trust company called Directed ira. It's a trust company based in the state of Arizona. Bank regulated, FDIC insured, where you roll your money from Merrill lynch to Directed Ira. Now this is a company you go to directed ira.com. nancy, throw that in the feed, if you will. This directed ira.com and so lock anybody out there. Step two is to roll it for Merrill Lynch. You basically fire them. The hundred grand goes down here. Let me tell you, it's a big expensive cost. It's going to blow your mind. 300 bucks.

That's it.

300 bucks. Open a new account at 350.

Oh, is it 350?

I guess it's over the top three. You set up the new account, and then on day three, they call you up and they go, what do you want to do?

Yeah, I want to invest in a rental property. I want to invest in my friend's business. You know, he's starting a restaurant or he's got a. Whatever it is, we don't care.

So we'll put number three here. Now you have an IRA with 100 grand in it at a custodian that will do what you want to do. And you say, I'm setting up an LLC over at Kkos lawyers. Oh, all right. So you now you have an llc. And luck, you are now the manager of this llc. You have access to the checkbook, and you're investing your 100k. Boom. So I just. I'm just gonna do it now.

Boom. Oh, is this the pen drop? Is that a thing? I'll think about the thing. Now, keep in mind here, this is all retirement account money. This is not you out making these investments. So when you go and invest, you buy the LLC or you invest in a company. Your name's not on this stuff. Right? Your IRA is. Your IRA gets the money from it and the profits. You're building this up for long term wealth because you want to pull this out later at retirement.

Okay?

And what I like to tell people is it's like maybe you're good at buying mutual funds. Okay? Maybe you picked the right mutual fund. Can someone tell me a great mutual fund? I don't know. Most people have and they don't even know what the heck's in it. Okay, I have a mutual fund. What was the mutual fund? I don't know. So. But think of your investment opportunities. Do you maybe hear of a small business? Are you good at real estate? Maybe you should be investing in what you're good at.

Cryptocurrency you can buy. If you are really good at bitcoin and you've got a feel for it, you can buy gold, you can buy silver, you can buy racehorses, cattle, whatever you want.

Okay?

We got to get some questions. Nancy, there's a bunch YouTube says what

is the difference between using an IRA to fund a business and using a solo 401k to fund a business?

Okay, the answer, okay, so the question is from YouTube was what's the difference between using an IRA to fund a business and a 401k to fund a business? The answer is no difference. There's really no difference. The trick here is, and everybody here's the reality check and I'm going to go back to this, the second slide. Matt said getting money into your business. You can fund your business from Your best friend's IRA, your best friend's 401k, your brother, your sister. It's going to be difficult to go with family, mom or dad or a child, because the IRS says we don't trust that you're going to be fair. So it's called a prohibited transaction to have generally. Now there's some fine print loopholes once in a while, but generally you're not going to get family to fund your business with your IRA or your family members IRA. So, but if 401k or IRA has those same prohibition prohibited rules. But the beauty here is many people don't realize how many trillion dollars are in retirement accounts now.

28 trillion. That's the big number. And you know, between a 401k and an IRA investing, they can both be self directed. Now the question was a solo 401k, that's a really popular 401k for someone who's self employed. They don't have any employees. It's their 401k plan for themselves. They can almost always self direct those accounts. And they're great. We love clients that use those. They got a lot of flexibility.

So.

But you can have an IRA and any of those accounts could be funding business. Now when Mark said family, it's really important to understand if it's my IRA and I got this business I'm doing myself, I can't invest my IRA in my own business or my spouses, my kids, my parents, now my rich uncle that maybe have a big ira. This is cool. Okay. My cousin, you know, or even my sister that may have a big retirement account. They're cool. So there's certain family members that are fine. The IRS doesn't care. There's no logic to it. It's just, did these family members make the naughty list and you can't do their ira, can't transact with you and your business or are they on the safe?

Yeah. Now here's the loophole. See, now that's an operational business that you're a little worker be in. But what about this VRBO or Airbnb? Can your IRA invest in that? Yes. Can it partner with your brothers, your sisters, your husband, your wife? Yes. So if it's a passive investment that's going to be held for long term, then all your retirement accounts can play in it. But your operational business, you work from someone else. Now, I'm going to throw down a cool idea. Okay, I know we got bunches of questions, folks. Hang tight. Here's another way you can fund your business with a retirement account. Check this out. Let's say you have your S corporation. You can create a Solo 401K and you could drop into it this year up to $56,000. Now, there's some strategy involved and there's a sweet spot. I got videos on YouTube on this. But let's say you're doing your S Corp with your K1 and your W2. You fund a solo 401K. The 401K, you can get a tax write off for $56,000 this year. Then the 401K can turn around and loan you $25,000 to help fund your business. And it's crazy. Now that's not self directing, that's a loan. And what are you going to say?

Yeah, the other thing I was going to say is a lot of people who are starting a new business, they may have their own retirement account. They have an old 401k or an IRA that's even better. Okay, keep going. So you may be like, I need just a little bit of startup money. Maybe I need 25, 50 grand. You can start your own solo 401k.

Not even put money in my business. Yeah, you're starting out.

You don't have income yet in the business, but you have an old retirement account that you're going to roll into the 401.

So you take your old IRA. Lock. Here you go. Lock. Take that old IRA that you rolled over from Merrill lynch to directed IRA. Then the IRA rolls it into your new 401k and the 401k loans you 50 grand.

You had 100,000 to take. 100,000. When you take a loan from the 401k for yourself. This is a special rule on 401s, you take half the balance of the 401k not to exceed 50,000. So on 100, you're able to get 50 total. Now that 50 you're you put into your S Corp. I've had some clients do this and they take that 50. They pay off credit cards. They have a 20% interest. Now what happens is the 401k gets that money back though you've got to pay it back. It is a loan.

And when you pay the interest back, you get a write off for paying interest back to yourself.

That's tax free and it's actually growing your account. But it's your own retirement account. You're paying the bank and you're getting expense for it. And you're the bank too.

Why am I so excited about this? Aren't you excited about this?

I'm excited. I mean I just, I just spend time, my emotions show in different ways.

Miguel's probably excited because he wanted to know there a tax consequence to accessing the money from the ira.

Okay. So Miguel says, well you gave that example of Locke that's going to take this IRA and roll it to Merrill Lynch. So let's go to Locke's example. You got 100 grand at Merrill Lynch. You're going to sell the stock, put it back into your IRA at Merrill Lynch. Then you're going to move the account from Merrill lynch to directed ira. Is there a penalty? No. Is there a tax? No. All you have to do is open the account. But Merrill lynch is not going to tell you this. We're gonna get some hate mail from Merrill Lynch. It's any financial Wall street brokerage firm.

Really? Yeah.

They don't want you to do this. So you roll the money over there. There's no tax, there's no penalty. And then Locke can turn around, roll it into a new self directed 401k and loan it back to his business.

Let me stop here because if this is a Roth ira, you would just have a Roth IRA for Mary Lynch. Now you have a Roth ira.

Direct.

It could be a separate, that's now SEP ira. It could be a traditional, it could be an hsa. You're just changing who the provider of your account is. You said, no, I don't want Merrill Lynch. I don't have Charles problem. No, I don't want TD Ameritrade. I want to have directed ira. But the key is to self direct and be able to make these non publicly traded asset investments. You need a self directed IRA and that's what you can do.

Direct.

Okay.

I hope you guys are loving this. We're going to again give away two books. For those that share this, this broadcast with any of their friends, we'll give one away on the YouTube and one away on the Facebook. We'll leave it up to Darcy to get those out. Also, down below is the web address for directed ira, so you can set up your IRA accounts. Now, if you want to go to our law firm, kqslawyers.com we can set up your 401k. But even if you don't like us, we're goofballs. We love this stuff. But if you don't like us, just get out and do it. Take control of your retirement account. Okay, next question.

Herb says, you know, someone else will.

Yeah, Herb says, what if I already have a solo 401k? That's for real estate, investing, lending, can it converted to be used for funding the franchise?

Oh, you don't even have to convert it. But yeah, that's. So let's. Where's the good picture of this? Okay, here he is. This is Herb. Okay, Herb is right here. And Herb says, I've got a S corp of the solo 401k that he's already doing real estate and lending, and now he wants to set up a franchise.

Go ahead. All right, well, let's talk about this. Now, when you say, I want to set up a franchise, what are we talking about? Is the solo K going to own the franchise? Is this a franchise you want to personally own? Is this a friend's franchise you're trying to fund? You know, there's different angles.

This is where a consult would be important. Herb, call me. Okay?

So if you were gonna say, well, I want to use that solo Kim money to fund a franchise I own in my own S Corp that I'm running at, I'm like, you know, it's the subway and I'm the sandwich artist. Okay.

We're talking Rob's. Yeah, yeah, yeah.

Well, you could do this. You could do the loan, get the 50k loan.

You could do along.

Yeah, you can do something called the Robs rollover on business startups. It's a little more complicated for this,

and I want to give a shout out to Guidant. We love Guidant up in Seattle. They're a great company. We've had their CEO on our podcast before, and they do a great job, but that's a unique one. If you want to own or operate the franchise, it's going to be trickier to have your 401k fund the whole deal. Now, if Matt's going to start a franchise, my 401k wants to be. Be an owner or a partner. Yeah. Do it all day. It's all good. But I'm not going to be working in it. It's Matt's franchise I'm operating now.

One thing you could do is you could have the Solo K own the franchise 100%. It owns the franchise. It has its own employees that run and operate the business. And your solo 401k just owns the business.

Yeah, you can do that. They're not working in it.

By the way, is a fan. He wants to know how the skiing was.

Locke is a fan. He's Matt. And I did. Okay, see, this is a whole other topic because we have our own board of directors, which all of you should. And we take trips together to talk business. Sometimes we bring our spouse with us. Sometimes we just are out there strategizing. And we went skiing last month, did a little planning on the ski lift, and this Saturday we're doing the same. We were worth a whole board meeting

because I'm on the snowboard. There you go.

All right, next question.

Doesn't work for the skis. C.J.

says, Can I open an IRA and do a back door and fund my Roth?

Oh, my gosh. The backdoor ira. What's his first name?

Cj okay.

CJ Says, how does the backdoor Roth IRA work? Okay, I'll diagram while you talk.

Okay. BackDoor Roth IRA. Why you would need to do this? You make too much money.

Income limits.

Roth IRAs have been restricted for high income people. It's about 100,000 single, 190,000 married, approximately, give or take 10 or 10,000. But if you are over those limits, IRS says you cannot contribute to a Roth IRA. You're blocked.

You can't come in the front door.

The front door is locked for you. Okay. The IRS will not give you the password or anything.

Okay.

You don't get in the front door, but you're a smart cookie, so you say, all right, there's a way around this. It's called the back door. What you do is you set up a non deductible traditional IRA and you're going to put in your $6,000, which you could do. And in fact, if you didn't do it for 2018, right now, you could throw in another 6,000 for 2018.

So you could throw in.

That'd be 5,500 because that was the rule last year. So you've got 11,500, possibly you're doing right now for 2018-19.

So step one, you form a non deductible IRA. No matter how much money you make. You can do this. You can even have a 401k at your day job. Fund your IRA for last year and this year drop close to 12 grand in there or 11,5 non deductible IRA. Then step two, step two is you're

going to convert the non deductible IRA to Roth. Now, there used to be rules that changed about 2012 that said there was income restrictions on conversions. They removed the conversion income restrictions. So now you may have the high income, but you're not restricted on converting.

Wait, you're in the way of my artwork. This is really important. Come on.

I guess it's an eye. But the cool thing is you convert to Roth, but a lot of people are like, oh, am I going to have to pay tax on that? No, because you did a non deductible ira, you did not take a contribution because you weren't allowed actually on income limits. But you convert it to Roth, no tax on the conversion. You basically work. It's just like you just put 11,500.

Now, for some of you, yeah, some of you, your brain went to mush on this example. Let me get back here, get back. This is important. Some of you are like, what the hell's a Roth IRA? Here's the point. Roth IRAs are amazing. They grow tax free, they come out tax free. So in this whole self directed conversation, if you can build a Roth 401K or a Roth IRA, you're in the party. That is the party you want. That's the after party. You want to be at that party. But again, if you make too much money, you can't get there. So what was this first name? CJ Said, I want to be in the party. So option two is the non direct deductible ira, convert to a Roth. The other one, which is just simple and easy of any of you out there that have traditional IRA money, you can just do a plain old conversion. You can convert as much as you want, no matter how much money you make, and you can chunk at it. You can take little pieces and parts.

All right, the conversion, of course you're paying tax.

You convert.

That's why Mark said you're gonna chunk at it. Now here, let me just say this. The Roth ira, this is one I think a lot of people like, well, I want tax deductions now. You know, I want to make traditional contributions to get tax deductions now. And you're saying that, but in 10 years you're going to be like, oh, why would I do not do the Roth ira? Why did I not convert earlier, if the money into the Roth IRA comes out tax. I'll give you one example of why I got into self directed IRAs. In the beginning, I had a client buy an option on real estate. He was a real estate developer with his Roth IRA for $10,000. Within three years he sold that option on the real estate for over a million dollar profit. That million dollar profit, that $1 million plus profit, went back in his Roth IRA. No tax on the gain and it's going to come out totally tax free at retirement when he reaches 59 and a half. When I saw that, I was like, oh my gosh. If he did that with a traditional ira, sure he made a huge return and he didn't pay tax on the gain, but he's got a million bucks in a traditional ira, he's going to pay tax on the way out. Now this million bucks is coming out totally tax free.

Okay, now we may need to cut this off. We get excited. We have a four full day summit. We do in the spring and the fall on this. If you're following us on our website, if you get to our newsletter, you can get to our podcast@rejuvenyourwealth.com or the Law firm site Nancy's. Put it down in there below. Sign up for our newsletter. We do a full day workshop on this and we probably need to be cutting this off. Darcy, are we okay? Is it too long? Okay, we're going to just go a few more minutes. Some more questions. We have more questions based on these questions.

You two are the rock stars at the after party. Just saying. Gordon says he has an idea. He says I find off market properties then purchase them in my ira and I like to partner with other self directed IRA owners on deals.

Okay, cool. Let's just say. What's his first name?

Gordon.

Okay, Gordon. And I'm going to use this little board where I was drawing up here. Everybody. You want to have kind of a Thanksgiving table of food here. When you talk about your retirement accounts, you want to have all sorts of options. You might want to have real estate in your own name, which I've talked about here many times before. But you can have a 401k, you can have a traditional IRA, you can have a Roth, you could have an HSA. Your spouse, your kids could all have accounts. You want to be building different buckets in this whole equation. It's not just one method. That's awesome. There's all sorts of options. And so what's his name again? Gosh darn it.

Gordon.

Gordon said what he's doing is he's taking his Iraq, buying off market properties in an LLC with other partners. So his partners are the bird dogs. They're finding properties and his IRA is getting a piece of the action. So. Compliments, C.J. rock.

Love that.

All right, next question.

Can the self directed IRA fund the LLC to buy my existing rental properties?

Okay, let me repeat that. Matt will field it. They said, can their current IRA invest in an LLC where they have current rental property they own? Can I somehow buy rental property that I already own for myself with my ira?

Now, why do you always give me the ones that I have to say no? Like, you can't. Like I'm the one that has to bear the bad news.

This is a good cop, bad cop plan. I answer the easy, good questions, he answers, the bad cop comes in.

Okay. All right. Unfortunately, no. And the reason is that's called a prohibited transaction. As we mentioned a little bit earlier, the IRS doesn't trust you with your own retirement account, so it's prohibited for you to transact between your own retirement account and let's. Let me just give you a reason why. Congress thinks that if you own real estate, let's say you bought for 100 grand and now it's worth 300, that you'd be like, you know what? I want to sell that property that's worth 300. Really, just for a hundred to my IRA. Then I'll have my IRA sell it for 300 so I don't pay any taxes.

That sounds like a great idea.

I would tell you to do that if it was legal, but it's not. And so. And that's the reason why is they didn't trust you. They don't trust property or assets your spouse owns. Your parents and your kids either.

Yeah. So what you could do is my IRA can buy that property for Matt that is worth 300 grand, but he's not going to sell it to me for 100. That's what the government did. They kind of let people police themselves because they know that a third party isn't going to give a sweetheart deal where you do it to yourself. Next question.

Locke is loving you guys. He says, thanks for the great explanation. Good question. Can I charge the IRA LLC a management fee in order to get some money out of it?

Good question. So let's say we can use the same diagram. I'll be the bad guy. Okay. I'll be the bad guy. Locke said his IRA formed an llc. The LLC owns rentals. Can I pay myself A management fee for running the show. The answer is no, you cannot do that. You can't. Now, you can set up an LLC to go buy rental property in Hawaii, but you can't have the LLC pay your plane ticket to go to Hawaii to check on it. The LLC can't pay you a management fee to check on it. It's got to be an arm's length deal. So you got to be careful there.

Now let me say this too. If mom says no, ask dad,

because

what now, let's say your retirement account owns this. If you're 59 and a half, you know, of course you could just be taking distributions. And if you really needed the money, you can take it out. And you do pay a 10% early

withdrawal penalty if you're under 59 and a half.

If you're under 59 and a half. But I think a lot of people are like, well, I want to pay myself a management. Well, you realize you would take that into income, right? So the management fee isn't a great idea.

That's good. That's a good point. You could do it. It just would be taxable. If you're over 59 and a half, you do it. I never thought of that. Okay, we're going to take one last question and then it's out. Okay, we're giving direction from our director.

Yes, perfect wrap up question. He says, my mind is mush. What's a good starting point for beginners? Set up the IRA Roth. IRA first, then llc.

Where's your book? Give me your book.

And when are you gonna have a workshop about stocks?

Okay, first name, Chris. Chris says that you guys rock. No, we didn't say that, but Chris said. My mind is a little mushy after this conversation. Guys, if some of you were able to make it this far, let me say thank you because it is a complex topic, but it really is exciting because it's your IRA, it's your 401k. Don't let some stockbroker or some Wall street institution take control of your retirement account. It's yours. And he said, where do I get started, folks? I would start with simply getting Mat's book. You can get it on Amazon, the self directed IRA Handbook. Great little primer. And get it on Kindle or print number two. Start checking us out on our podcast. We do one every week. We try to keep it as fun, if we're fun at all for you today, we're trying to keep it fun. Check out our podcast. It's every week and we do an open forum show every third week where you can ask questions on itunes or stitcher. And I'd say third, get to our website, kkoslawyers.com we have a newsletter, we have tons of videos and articles. And just start eating one bite at a time, just like eating an elephant. There's no rush here. Just start learning about this. I've got a great YouTube channel, Matt's got a great YouTube channel. And if you Google self directing and Kohler or Sorenson, we are literally trying to be one of the top in the country.

So I'll say one thing about your mind being much I think what I try to tell people about self directing your retirement account is it's like learning a new board game, right? If you sit down and try to play it and you don't have a rule book or you're not playing it with a friend, you're not going to know what the heck you're doing. Yeah. And then someone else is going to come up and be like, what the heck did you just do? You're playing it wrong or you're doing it wrong. Okay. So what you want to do is just take some time, learn how to do it, talk to other people that have done it, work with other professionals that can get you in the right direction. But after you've done it once or twice, it's the same game.

Okay.

It's not that it's complex or hard, it's just you've never done it before. I love it.

Great analogy. Well, everybody, keep living the American dream. Don't give up on will be back here in two weeks. I'm on break next week. It has been a long four months of tax and legal planning around your end. So we'll catch you in a couple weeks. And if you want to email me.