DVC in IRA

[727jay]

Has anyone had real estate (read: DVC) in an IRA? Or heard of it? I am trying to figure out if it is legal to put a membership into my IRA and I am hoping someone might have tried it or looked into it already. I have my doubts that the IRS would allow something like that, but you never know.
By the way, how do you put those "smilies" in the text? Yes, I am new to boards.
Thanks,
Jay

 

[HeffalumpB]

I don't know how it could be put into an IRA. Contributions to an IRA must be from earned income, and I have never heard of property being in one.

Maybe you are thinking of a trust or a living trust? You can set one up through an attorney. However, I don't think any tax benefits will come of it.

 

[CarolAnnC]

I have never heard of putting property/timeshare into an IRA. Sorry...

When typing your reply, you will see the Smilies selections. Simply click on one like this,

 

[savannahcat]

I have heard of buying investment property (real estate) with funds from an IRA, but I think there a lot of rules involved and I'm not sure if timeshares would qualify. Not sure where you could find out more information.

ETA: If you google "buying real estate with an IRA", you'll find lots of information on the subject. Seems like you need a self-directed IRA to make this work.

 

[Dean]

My understanding is it's not allowed.

 

[JimMIA]

I don't know whether or not it's allowed, but I can't imagine what the point would be. (Sorry, just showing off. I'm over it now.)

The advantage of an IRA is that the principal can grow tax-deferred until you take the money out. A DVC ownership is certainly not likely to appreciate over time, so it seems to me that holding in an IRA would serve no purpose.

 

[Dean]

The advantage of an IRA is that the principal can grow tax-deferred until you take the money out. A DVC ownership is certainly not likely to appreciate over time, so it seems to me that holding in an IRA would serve no purpose.

The other benefit would be to use pretax dollars to buy in and as you say, no appreciation means you'd never have to pay taxes on those dollars. The individual retains too much control and gains personal benefit from the asset making it a no go for any retirement plan including IRA, SEPP, etc as well as any deferred compensation plan (457). I also doubt they'd buy the mental well being angle to allow MSA money to be used for such a purchase either.

 

[JimC]

I don't know whether or not it's allowed, but I can't imagine what the point would be. (Sorry, just showing off. I'm over it now.)

The advantage of an IRA is that the principal can grow tax-deferred until you take the money out. A DVC ownership is certainly not likely to appreciate over time, so it seems to me that holding in an IRA would serve no purpose.

Agree with Jim on this.

 

[DisneyWalker44]

One of the restrictions on a self-directed IRA is that any real estate cannot be used for person reasons.

 

[silmarg]

If the real estate owned by an IRA is used by the IRA owner or a relative, that will be a prohibited transaction that can disqualify the IRA. Disqualification means all of the IRA is taxable in the year of disqualification.

If the IRA owner or a relative manages the real estate, that will be a prohibited transaction that can disqualify the IRA.

If the IRA owner pays any expenses of the real estate directly, those could be excessive contributions to the IRA subject to penalty.

Bottom line... its very difficult to own real estate in an IRA. Owning a DVC would be even more difficult.

(I am a tax practitioner, but this is not an area of my expertise)

 

[fatfish]

You would need a self-directed IRA to purchase property. I own real estate in my self directed IRA. The catch, however, is that you cannot personally benefit from the property, ie you could not stay in that DVC. You would have to rent it out to others. While this works nicely for houses and other rental property, it is not practical for a DVC or other timeshare.