Posted on 09/21/2021 11:33:55 AM PDT by SeekAndFind
New tax laws by Democrats are on deck and in the books. And if you have an IRA or will inherit one, these changes may impact you in a huge way.
The Responsibly Funding Our Priorities Act as proposed by the Democrats Ways and Means Committee in the House will kill private placements in IRAs.
Section 138312
Sec. 138312. Prohibition of IRA Investments Conditioned on Account Holder’s Status. The bill prohibits an IRA from holding any security if the issuer of the security requires the IRA owner to have certain minimum level of assets or income, or have completed a minimum level of education or obtained a specific license or credential.
For example, the legislation prohibits IRAs from holding investments which are offered to accredited investors because those investments are securities that have not been registered under federal securities laws. IRAs holding such investments would lose their IRA status.
This section generally takes effect for tax years beginning after December 31, 2021, but there is a 2-year transition period for IRAs already holding these investments.
Not only will you no longer be able to buy such investments, as worded you will have to sell those you already own within two years.
Section 138313
Sec. 138313. Statute of Limitations with Respect to IRA Noncompliance. The bill expands the statute of limitations for IRA noncompliance related to valuation-related misreporting and prohibited transactions from 3 years to 6 years to help IRS pursue these violations that may have originated outside the current statute’s 3-year window. This provision applies to taxes to which the current 3-year period ends after December 31, 2021.
Section 138314
Sec. 138314. Prohibition of Investment of IRA Assets in Entities in Which the Owner Has a Substantial Interest. 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. However, an IRA owner can invest IRA assets in a business in which he or she owns, for example, one-third of the business while also acting as the CEO. The bill adjusts the 50 percent threshold to 10 percent for investments that are not tradable on an established securities market, regardless of whether the IRA owner has a direct or indirect interest. The bill also prevents investing in an entity in which the IRA owner is an officer. Further, the bill modifies the rule to be an IRA requirement, rather than a prohibited transaction rule (i.e., in order to be an IRA, it must meet this requirement). This section generally takes effect for tax years beginning after December 31, 2021, but there is a 2-year transition period for IRAs already holding these investments.
Section 138315
Sec. 138315. IRA Owners Treated as Disqualified Persons for Purposes of Prohibited Transactions Rules. The bill clarifies that, for purposes of applying the prohibited transaction rules with respect to an IRA, the IRA owner (including an individual who inherits an IRA as beneficiary after the IRA owner’s death) is always a disqualified person. This section applies to transactions occurring after December 31, 2021.
These sections, especially 138312 and 138315 are very damaging.
Those restrictions are across the board, not just striking back at those making millions.
Supposedly the concern is a level playing field.
But if leveling the playing field is the genuine concern, instead of disallowing these investments, how about opening them up to everyone?
I am not sure what ****head proposed these rules, but we need to raise a fuss over these provisions now.
Common Cause also has a way to Find Your Representatives.
Please take action.
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They hate it when the normal people work hard and try to save money for their “golden” years so as not to be a burden to anyone. They want that money. Do not doubt this.
But the ruling elite gets to keep it all, live high off the hog, and to hate and scorn the common herd.
I will have to definitely look into this. I have a self-directed IRA.
Better read this.
When is that appt w/ Mandy?
Please explain what a private placement is. I recently rolled my 401K to a Roth IRA.
Many IRAs are just accounts in a bank.
I wasn’t aware that one could have them hold anything other than ‘money’/greenbacks.
It’s just lately that I’ve seen ads for converting the IRA into holding gold.
Maybe that’s what the Dems are after.
They want all the marbles and it doesn’t matter the how high the body count has to go.
Thanks for the clarifications.
“converting the IRA into holding gold.”
Just make DAMN sure you are holding the AU in your hands! Do not take paper indicating someone ELSE is holding it for you!!
Short version : if you have n IRA you are screwed and soon to be impoverished.
If your here its probaly an investment you need not worry about. more for mega buck types
Good for you on the conversion
A private placement is a purchase of company assets before its IPO.
The Peter Thiel example is perfect here: he bought his pre-IPO shares in his Roth IRA. Now, that Roth is valued at $5B, and he will not have to pay a penny in taxes on it.
My hat is off to him. He is very smart.
People may be jealous, but for every Peter Thiel, there are probably 10 or even 100 who tried, and lost everything.
I’m no financial whiz and ICBW, but I see this as something very sinister.
If “more speculative” investments bring higher returns and these investments are being banned, then permitted investments will garner lower returns. That being the case, I see the gov’t. stepping in to take over these accounts using the excuse that it (the govt) can do a better job with ROE than non-govt. entities. This will be especially true should the stock market go markedly south.
Congress has been eyeing private retirement accounts and pension funds for decades. It’s a huge pile of money NOT under their control and they WANT THAT CONTROL!!
“Please explain what a private placement is.”
Here’s a “Readers Digest” version. There are rules and regulations that define different investments. Mutual funds have their rules. ETF’s have different rules. Individual stocks and bonds have other rules.
They are regulated to the point where pretty much anyone can invest in them because the risks are (theoretically) laid out in the prospectus. It’s not cheap to do.
Private Placements go through a different set of rules that are more lax. They can do that because (making this simple and leaving out some details) investors have to have investible assets of a million dollars or more not counting their home or car. It’s thought these folks are savvy enough or have the capacity to take a loss on these things. They are referred to as “accredited investors”.
It’s a lot cheaper to create these things and it is often for a deal of limited size. There is normally a finite and fairly low number of units available.
Private Placements have different underlying investments such as loans, real estate or other non-publicly traded assets. It’s usually not possible to get out of the deal early.
I’ve seen them used to fund golf courses, buildings or debt instruments like loans.
Hopefully you had no income that year because it's all taxable as income. Private placements are like limited partnerships. Typically require "sophisticated" investors with minimum net worth and/or income. They are not traded on an exchange so liquidity is severely limited.
Well, being pretty ignorant on financial matters, I hired some financial advisors an attorney/CPA friend recommended. I am getting taxed on it for 3 years but in the projections it works out better during my retirement years.
It's a better IRA type for sure, especially for estate planning value.
I think that there’s another equally valid (small-l) libertarian perspective.
The “rule” that requires an investor to be “accredited” in order to invest in private placements was ostensibly created to protect the unsophisticated rubes from exploitation. But why accept that? The other way to ‘fix’ this would be to remove the requirement for accreditation, rather than ban the use of private placements.
Anyway, the bar is pretty darn low. Anyone with a net worth of $1MM (excluding his private residence — why?) meets the bar. So does anyone making 200K a year for 3 years running (that’s gross, net of taxes. Again, why?)
Of course, the real problem is that marginal tax rates are simply so high that people are working around the edges, trying to shield at least some of their hard-earned income from the tax man.
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