Jim Hitt’s Response to Appeals Court Upholding the Self-Directed IRA Strategy

American IRA CEO, Jim Hitt

Investors have a tremendous amount of leeway with tax protections in a Self-Directed IRA. Although there are some explicitly-laid-out regulations that govern retirement accounts of any type that investors should always pay attention.

Over ten years ago, two brothers started an export business from scratch, eventually growing the business and transferring a tremendous amount of wealth into a Self-Directed IRA. The IRS was not too happy about the decision, arguing that while they had not necessarily violated tax law in this case, the brothers had still violated the spirit of the law.

The decision of the federal Appeals Court in Summa Holdings, Inc. v. Commissioner ruled in favor of the business.

That was not the initial decision, however, explains a recent blog post by Jim Hitt at AmericanIRA.com. The brothers in question had incomes that should have prevented them from making Roth IRA contributions to a certain extent, and the IRS was looking for owed income tax on DISC commissions as well as penalties for over-funding their Roth IRAs.

The higher court, however, struck down the decision, pointing out that the tax-protected accounts were being used as Congress had intended—or at least, as the laws were written.

The judge’s opinion went on to say that corporations and IRAs could in fact own shares in DISCs, making the investments within a Self-Directed IRA valid. In turn, the decision showed that there can be tremendous value to holding a Self-Directed IRA when it is done legally. In this case, the IRS complaints were deemed by the Appeals Court not to be valid according to the law.

“Investors have a tremendous amount of leeway with tax protections in a Self-Directed IRA,”…

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