2007-07-18 03:45:06 · 5 answers · asked by Anonymous in Business & Finance ➔ Taxes ➔ United States
An IRA can only hold cash-based investments. It cannot own real estate.
2007-07-18 05:08:34 · answer #1 · answered by Bostonian In MO 7 · 2⤊ 2⤋
It is possible to own real estate inside an IRA. The companies that serve as trustees will tell you the advantages of investing in real estate inside a self-directed IRA.
If you are a person who has the ability to successfully invest in real estate, then you might do well using your IRA to invest in real estate. It would be far better that this be a Roth IRA of course.
From a tax standpoint, some real estate investments would not make sense. For example, purchasing a business property for cash inside a traditional IRA would be likely be a poor choice. You cannot take advantage of the tax benefits of business property ownership, plus you are converting capital gains to ordinary income.
2007-07-18 12:30:07 · answer #2 · answered by ninasgramma 7 · 0⤊ 1⤋
You need to go through some hoops to be able to funnel money into the purchase but after that you are in great shape.
If you put several thousand of IRA deduction funds into a real estate purchase and then made a profit of thousands on that purchase all of the profit is treated as a growth in your IRA and subject to the same tax-deferred status as if it went into a mutual fund and made a much more modest gain.
2007-07-18 15:08:55 · answer #3 · answered by Rich Z 7 · 0⤊ 0⤋
Inside of a Roth IRA could make sense. Otherwise I think it is not wise to invest in real estate in an IRA. If it turns bad there is no tax benefit to a loss and if it is succesful you pay ordinary tax rather than capital gains tax on the earnings.
2007-07-18 12:42:05 · answer #4 · answered by waggy_33 6 · 0⤊ 0⤋
As a rental property, no. Most rental property operates as a loss and losses within an IRA are not deductible.
2007-07-18 11:48:51 · answer #5 · answered by Wayne Z 7 · 0⤊ 0⤋