My broker, accountant and attorney tell me a Self Directed IRA is illegal or frowned upon by the IRS, could they be correct?
Mostly everything your broker will tell you is an attempt to maintain your assets under their management and this becomes much more obvious the longer they talk.
Your CPA is probably in business to file taxes. Your local attorney isn’t an expert on TSD IRAs. These professionals usually won’t want to take the time and effort to analyze the tax code in depth and provide you with a real answer for nothing.
To put you off you might get told…
“Technically it is possible to but it is frowned upon”
“This is a loophole and the laws will change”
If you’re told this is illegal, simply ask your specialist exactly where that is stated in the tax code. They won’t find it. In fact, ask them where it is stated that you can buy securities. They won’t find that either.
To say that this sort of structure is frowned upon by the IRS or another kind of government is completely wrong. Nowhere is it ever indicated that the United States government doesn’t want you handling your own retirement account. Quite on the contrary, there are lots of indications that the relevant arms of government are completely privy to this sort of strategy and don’t “frown” upon it at all. There’s other strategies that are more concealed than the TSD IRA that are being openly looked at, if the TSD IRA were in the same category it’d be said publicly.
To say that this is some kind of a loophole or grey area in the law is simply a clear misunderstanding of the terms loophole or grey area. The meaning of loophole is “a means or opportunity of evading a rule, law, etc.” The TSD IRA structure is directly in line with the reason for an IRA and is in no way a strategy to evade the laws in the tax code. Grey areas are generally grey because the situation hasn’t yet been tested through legislation. The IRA LLC structure has clearly been checked out through the courts and relevant authorities and is in no way a grey area. Unless the professionals saying this are senators or top tier officials, they can not tell you with any certainty how the laws may change. If the rules for IRAs were to change then now would be the perfect time to act.