Ask Terry Questions real estate IRA

real estate IRA

By Terry Savage on June 11, 2015 | Housing / Real Estate

my husband purchased a house using money from his investments to purchase a house in a real estate IRA???
We have owned the house and have collected some rent for 5 years. We are now nearing retirement – 62 and wondering what way to rollover the house – sell and not get penalized? or do we keep it for another 5-10 years and collect a modest rent? We will need the money for our retirement.

Terry Says:   I’m hoping that you had an independent trustee for your real estate purchase using money in your IRA!   If you did it correctly, then that trustee handled collecting the rents (which were not taxable to you since they were in the IRA) and that the trustee handled paying for repairs, etc with rent money inside the IRA trust.   If that is not the case, you have a real problem with the IRS and need a tax expert to consult with you.

If you did do it properly, your Trustee can oversee the process of selling the property when you choose.  Then the IRA will have cash inside.   Depending on the rules of the trustee, it could be rolled over into a more traditional IRA investment somewhere else, and invested perhaps in a mutual fund or just a money market account.  But do consult with your IRA trustee about how to handle this process.  When you withdraw any cash it will be taxed as ordinary income — as is any withdrawal from a pre-tax IRA.



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