New Tax Law Proposal Will Kill Private Placements in IRAs: If you have an IRA or will inherit one, these changes may impact you in a huge way.

Mish Talk ^ | 09/21/2021 | Mike Shedlock

[Red Badger]

They obviously don’t want the hoi-polloi to be rubbing elbows with their own.......................

[Bell Bouy II]

How about a CliffsNotes Version vs a cut and paste mishmash of info the avg slob doesnt understand.

[Carriage Hill]

BKMRK.

[Carriage Hill]

Good idea.

[kosciusko51]

The rich get richer
The poor get the picture ...

[Bell Bouy II]

If I ask my CPA he wii probaly wont know what Iam talking about.
Or end up telling me dont worry about it as it does pertain to me.

Vanguard manages my $$ so I may ask them.
If I remember

[1Old Pro]

Private placements are not typical IRA investments for the average Joe. So, this has very little impact.

[SeekAndFind]

Here’s how I see this:

Under current law, the rich can put their truly speculative investments, or shares and options on their own companies (as to which they have more control over subsequent appreciation than you and I have over the shares in our IRAs) into a Roth IRA.

Mitt Romney did this with parts of the companies Bain Capital acquired -— the “spinoff” -— and his IRA is now over $100 million. Peter Theil did it with Paypal shares and his IRA is now over $5 billion.

You and I (assuming you aren’t as rich as Mitt Romney or Peter Thiel) aren’t ever getting into that club.

Libertarians should not support one set of rules for the uber wealthy and another set for the rest of us. The “private placement” exception is a rule that allows self-dealing, something which I can never do in my IRA. For example, I cannot have my self-directed IRA purchase any property from me or any of my relatives, regardless of the price. It is a prohibited transaction that comes with serious penalties if you try it.

But Mitt could have his Roth IRA buy his spinoffs, and Theil could have his Roth IRA buy shares in the company he founded.

So the Dems get to virtue signal but watch as the final bill, if any actually passes, eliminates most of the described changes or adds new exception that allow the uber wealthy to continue doing what they have always been doing.

[Still Thinking]

To prevent self-dealing, under current law prohibited transaction rules, an IRA owner cannot invest his or her IRA assets in a corporation, partnership, trust, or estate in which he or she has a 50 percent or greater interest.

Am I misreading this or are they smoking something? The statement about the current state of the law, not the change. How does putting oneself in the same position as the shareholders introduce the risk of self-dealing if you're already supposed to be acting in the interests of the shareholders? Wouldn't it REDUCE that risk? Aruh?

And what about self-directed IRAs that hold rental real estate for example? That's legal, and in that case, you're still both management and investor (albeit typically the sole investor).

[Jonny7797]

It’s government overreach without question but I am curious how many IRAs participate in private placements?

[Bell Bouy II]

Looking like us peons with only a couple of Mill need not worry.

Ha Ha

[1Old Pro]

what about contribution limits?

[Ouderkirk]

I have always opposed IRA’s with their resultant penalties for early withdrawal and the other problems associated therein.

Save or don’t save. There should be no tax advantage or penalty.

[Carriage Hill]

Are you saying that moving a regular IRA to a Roth IRA is now verboten?

[faithhopecharity]

Keeping the proletariat down and under control

[ETCM]

Save or don’t save. There should be no tax advantage or penalty.

Tax law has always been used to encourage or discourage behavior. Getting married, having kids, spending money, saving money, buying a house, assuming debt, investment in government favored companies and industries. Taxation is about control.

[Dave Wright]

My take on this is that the new laws are designed to prevent people from investing their tax advantaged IRA assets in speculative unregulated assets (like bitcoin?) or assets where they are otherwise financially liable. The intent seems to be to lower the risk of IRA investments so they are available at retirement and not coupled with other personal debt obligations that apply to business owners and could be confiscated with a bankruptcy or reorganization.

This seems like prudent diversification of long term tax advantaged assets that any intelligent investor would already be doing. The fact that people need a law to get them to do the right thing is just an admission that a lot of people are financially crazy.

[rlmorel]

BFL

[mewzilla]

Camel’s nose.