Florida Man Blows IRA Bankruptcy Protection
The facts, in this case, were pretty egregious. Will bankruptcy trustees start scrutinizing plan operations closely in order to find some foot fault that would disqualify them? Self-directed IRAs have always made me a little nervous and I find it a little shocking that the transactions described in this decision would not have set off alarm bells at the custodian. I’m thinking there might be a bigger story there.
The practical takeaway I get from the decision is that if you have reason to be concerned about asset protection, you might want to think about whether a self-directed IRA is your best choice since apparently, it is not just the IRS you have to worry about looking over your shoulder.
Clever Techniques To Defer Capital Gains – Maybe Too Clever
This is the technique that is most exciting Using an installment obligation as collateral will generally trigger gain recognition. The Monetized Installment Sale (MIS) purports to work around this allowing you to have the overwhelming bulk of the proceeds available for whatever purpose you want, while still deferring gain.
The support for this technique comes from a 2012 advisory letter from the IRS Chief Counsel Office – 20123401F . It’s important to note that this letter is not a blessing of the transaction. The revenue agent was asking whether the transaction should be attacked with either “substance over form” or “step transaction”. The Associate Chief Counsel told the revenue agent that it should not. So the answer was not that the taxpayers are right, just that they are not wrong in those particular ways.
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Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.