Bryan Ellis - SelfDirected.org
A Great Idea For Real Estate Flippers... But It Doesn't Work | SDITalk.com/319
Want to flip real estate in your IRA or 401(k)? Think you won’t owe taxes on your profits? You’ve made a very common error… but so did I in a solution I devised to that problem. Maybe my error will keep you from making any of your own, and I’ll tell you about it right now. I’m Bryan Ellis. This is Episode #319 of Self-Directed Investor Talk.----Hello, Self-Directed Investors, all across the fruited plane. Welcome to Episode #319 of Self-Directed Investor Talk, the SHOW OF RECORD for savvy self-directed investors like you, where each day, I help you to find, understand and profit from exceptional alternative investing strategies and opportunities!I have a great show headed your way right now. If you’d like to get the transcript or links to the resources I share with you today, just send text the word ep319 with no spaces to 833-212-2112. Again, to get a link to the transcript and resource links for this episode, #319, just text the word ep319 with no spaces to 833-212-2112 and we’ll get it right out to you.Well, I’ll admit it, folks… the brilliant idea I had yesterday isn’t going to pan out. Still, there’s a very helpful lesson in it that you’ll want to know, particularly if you like the idea of flipping real estate in your IRA or 401(k), and I’ll tell you all about it right after this…So here’s the idea: In the last couple of episodes I’ve shared with you 5 reasons that I’ve reconsidered my formerly 100% negative stance against oil and gas investing. It’s not that I never believed it could work, just that I had a misunderstanding of how risk can be mitigated, so the risk was all I saw. I’m definitely infinitely more open to that asset class now, and one of the big advantages created by many oil & gas investments – which is HUGE tax deductibility – sparked an idea in my mind:The idea was this: There are a lot of people who like to flip real estate in their IRA or 401(k). Unfortunately, most of those people seem to not be aware of the fact that most such transactions are technically “earned” income rather than “unearned” income, and as such, the IRA or 401(k) will have to pay income taxes on any profits realized from flips.So here was my thought: If a person does a flip deal that generates a lot of profit, why not just – assuming you have the available capital to do so – just mitigate those taxes by doing a separate oil & gas investment? That would generate a tax deduction which would otherwise be totally irrelevant for a retirement account since oil & gas probably IS unearned income, and therefore shielded from taxes by the IRA or 401(k), so you could take the tax deduction generated by the oil & gas deal and apply it to the income generated on your flip deal and VOILA, problem solved.Right?Well… Yes… until recently, that is. During the end of yesterday’s show when I described this idea, I kept hearing a voice in my mind saying… check it out, check it out! It was as if this idea absolutely SHOULD work, but for some reason, it won’t… I just couldn’t remember why.Well, I did what I always do when I have a question of this nature… I reached out to the Great One, attorney Tim Berry, for clarification. And he filled in the blanks for me. Apparently, before the recent Trump tax cut, it WAS possible for deductions generated by one investment to offset the profits generated by another investment in an IRA or 401(k). But apparently, that went away with the new tax law. That’s unfortunate. That tax bill has been so very good on such a broad basis and so clearly very good for our economy… but the fact is that there are still some somewhat crappy parts to it, and this is one of them.So… this idea won’t pan out. Not all of them do. That’s ok. Let’s keep thinking creatively together, shall we?My friends, invest wisely today and live well forever. See acast.com/privacy for privacy and opt-out information.
Duration: 6 min