Creating an IRA LLC

[ZoneTrooper]

Quote from futures_shark:

Just today I've been looking at setting up a non-profit in Maryland.

In your situation I guess that your not planning to take a salary for your activities.

From what I've read it looks like if you're paid as an employee, then the non-profit has to withhold and pay employment taxes on those wages.

Also what are you using as your argument that you should be classified as a tax-exempt non-profit?

The instructions for form 1023 state that you must be involved in religious, charitable, scientific, public safety, literary, educational purposes, or promoting amateur sports, or preventing cruelty to children & animals.

Yes, I'm not planning on taking a salary, or making any money.

This is purely a charitable way for my family to love others in need, and the only profit we will be making is to do good unto others, and to show Christ's love.

We are not trying to avoid taxes for our benefit, but are trying to create a mechanism that will help us to help provide for others in a more efficient manner.

So are exempt purposes are Religious, Educational, and Charitable.

In the near future, we will be working on trying to assist families at John Hopkins Hospital who have a child who is in the process of going through a Bone Marrow Transplant.

These families have lots of needs, and are financially crippled by costs that are not covered by insurances.

My family is very familiar with these costs, since I had two sons go through Bone Marrow Transplant, and my family has spent over two years at John Hopkins practically living there. So the Non-profit that I create will be focusing much of it's efforts to support these struggling families.

I don't think we will have any problems getting set up as a Charitable Private Foundation, but I'd like to go for the gold and be declared as a public charity.

So hopefully, we will be able to get the broad based support we need to get that more favorable ruling.

 

[Free Thinker]

so now you only have pure motives of charity? in you first post you said your intention was to use this trust to:"4. Make FOREX trades, and retire rich, rich, rich. " and this"Does anyone body see any flaws in this great plan do denying the U.S. government of my hard earned cache????"
and this little gem: "Am I the only one ET member making profits?

Seems like no one wants to figure out how to keep the Goverment from taking thier hard earned gains."



i think you are trying to pull a fast one with the irs and i dont think they will be amused when they figure it out.

Quote from ZoneTrooper:

Yes, I'm not planning on taking a salary, or making any money.

This is purely a charitable way for my family to love others in need, and the only profit we will be making is to do good unto others, and to show Christ's love.

We are not trying to avoid taxes for our benefit, but are trying to create a mechanism that will help us to help provide for others in a more efficient manner.

So are exempt purposes are Religious, Educational, and Charitable.

In the near future, we will be working on trying to assist families at John Hopkins Hospital who have a child who is in the process of going through a Bone Marrow Transplant.

These families have lots of needs, and are financially crippled by costs that are not covered by insurances.

My family is very familiar with these costs, since I had two sons go through Bone Marrow Transplant, and my family has spent over two years at John Hopkins practically living there. So the Non-profit that I create will be focusing much of it's efforts to support these struggling families.

I don't think we will have any problems getting set up as a Charitable Private Foundation, but I'd like to go for the gold and be declared as a public charity.

So hopefully, we will be able to get the broad based support we need to get that more favorable ruling.

 

[ZoneTrooper]

Quote from vhehn:

so now you only have pure motives of charity? in you first post you said your intention was to use this trust to:"4. Make FOREX trades, and retire rich, rich, rich. " and this"Does anyone body see any flaws in this great plan do denying the U.S. government of my hard earned cache????"
and this little gem: "Am I the only one ET member making profits?

Seems like no one wants to figure out how to keep the Goverment from taking thier hard earned gains."



i think you are trying to pull a fast one with the irs and i dont think they will be amused when they figure it out.

Actually, my plan is thus:

Create an LLC and invest my retirement plans in it, along with the kids colledge money. (That's the rich, rich rich part.)

Second, create the charity, and have it invest some of it's money into the LLC, so my family can do more in the area of charity. (That's the part that dosn't get me rich, rich, rich. But when I think about it again, I guess it does.)

It's profitable through and through.....

 

[futures_shark]

Zone trooper,

Sounds like you have some real genuine interest in helping others and I applaud you for that. Unfortunately I do not belive the IRS will let you benefit substantially while you do it.

I can't find the document right now but I believe in determining your tax-free status the IRS takes into account how you personally benefit from the activities. Also I believe your organizing documents must include specific instructions on how the funds will be distributed in the event that the charity ceases to operate. SO I don't know how you could set it up to withdraw funds for your childrens education, or your own use upon retirement.

If you have solved these problems then good luck. If not, your only option may be going offshore AND bending the rules.

Politicians are only interested in making people think they are interested in helping the less fortunate while they rob those who are fortunate.

 

[ZoneTrooper]

Quote from futures_shark:

Zone trooper,

Sounds like you have some real genuine interest in helping others and I applaud you for that. Unfortunately I do not belive the IRS will let you benefit substantially while you do it.

I can't find the document right now but I believe in determining your tax-free status the IRS takes into account how you personally benefit from the activities. Also I believe your organizing documents must include specific instructions on how the funds will be distributed in the event that the charity ceases to operate. SO I don't know how you could set it up to withdraw funds for your childrens education, or your own use upon retirement.

If you have solved these problems then good luck. If not, your only option may be going offshore AND bending the rules.

Politicians are only interested in making people think they are interested in helping the less fortunate while they rob those who are fortunate.

You misunderstood me.

The LLC I am creating will have the following entities that will buy into it.

My IRA owns 60% of the LLC
My Wife's IRA Owns 20% of the LLC
My Daughter's Ed IRA owns 5% of the LLC
My Son's Ed IRA owns 5% of the LLC
The Charity that I am forming owns 10% of the LLC

The trick here is that according to the IRS, IRA's are actual enties unto themselves, that I can not profity from until I retire, if I do, the IRA status ends.

The LLC is a For Profit Entity, that he Charity own's 10% of.

This is not much different if a charity or a church bought shares of a mutal fund.

Please keep trying to poke holes in my plans.

I can use any critique that I can get. The IRS regs are very vague on this whole thing.

Check out the IRS Letters that I posted earlier.
There is a case where an indivual who started a Charity many years ago, then later on, his family wanted to have the charity invest with them in an LLC just like I am doing. The IRS gave them a green light.

 

[futures_shark]

SO what your trying to accomplish is to combine all your separate IRA accounts into one large account for additional buying power?

And the LLC would be an investment manager taking no fees?

If the only money in the LLC account is coming from the entities you mentioned I can't see any reason why this wouldn't be a valid setup. You would have to create the charity with it's own funds first, then have those funds invested in the LLC.

 

[ZoneTrooper]

Quote from futures_shark:

SO what your trying to accomplish is to combine all your separate IRA accounts into one large account for additional buying power?

And the LLC would be an investment manager taking no fees?

If the only money in the LLC account is coming from the entities you mentioned I can't see any reason why this wouldn't be a valid setup. You would have to create the charity with it's own funds first, then have those funds invested in the LLC.

Yes. That's what I'm trying to do.

To me it seems fairly simple, and has lots of advantages for all the enities involved (The IRA's and the Charity.)

Though I find it interesting, that I don't find two many people talking about doing this very thing.

I would think that people in general would be doing this sort of thing all the time

Maybe not the Charity part of the set up. But definetly the IRA's investing into an LLC for the purposes of combining purchasing power.

 

[TaxGuy]

Zonetrooper:

Congratulations on doing research in this complicated area. For the most part you are on track, a couple key points you need to watch out for.

1. If you have to personally guarantee the account you will violate the prohibited transactio rules of 4975 (for IRAs) and 4941 (for the charity)

2. If you engage in too many trades, an agressive revenue agent could try to assert that you are running an active business, and thus the income will be subject to something called active business income.

3. Along the same lines, if the LLC ever trades on margin -- doesn't really apply to futures, forex or options, then you will have to pay taxes on the profits generated by the debt used.

 

[ZoneTrooper]

Quote from TaxGuy:

Zonetrooper:

Congratulations on doing research in this complicated area. For the most part you are on track, a couple key points you need to watch out for.

1. If you have to personally guarantee the account you will violate the prohibited transactio rules of 4975 (for IRAs) and 4941 (for the charity)

2. If you engage in too many trades, an aggressive revenue agent could try to assert that you are running an active business, and thus the income will be subject to something called active business income.

3. Along the same lines, if the LLC ever trades on margin -- doesn't really apply to futures, forex or options, then you will have to pay taxes on the profits generated by the debt used.

Thanx for your comments.

Comment 3: I was aware of that pit fall.

Comment 1: I shouldn't have to personally guarantee anything, since both entities should be well funded, and I'm not planning on borrowing any money. So I think I'm good there.

Comment 2: I'm not familur with Active business Income. Is this a state tax of some sort. In Maryland there is a tax on LLC's for Personal Property, which at a minimum is $120 a year, wether or not you have property. And no tax of course on non profits. Do you have a reference for the Active business Income. Unless you are talking about UBI income for the charity. Which I believe by having the charity invest into a LLC keep the charity from falling into that pit, since this would be akin to having the Charity invest into a Mutual Fund, and since the Charity is a silent partner, and is only providing investment capital it should be clear to all that it is simply a passive investment for the charity.

 

[ZoneTrooper]

Update,

My charity and two LLC are set up.

I'm waiting for the paper work for my online banking to come in the mail.

After my bank accounts are created.

Still need to finish the operating agreements, subscription agreements, and getting my accounts set up at iraresources. Decided that they were better than schwab as far as costs.

This is a lot of work getting it set up, buy hey, once its done, it should be a lot easier.