Mark Your Calendar: National Symposium on Self-Directed IRAs

Self-directed Individual Retirement Accounts (IRAs) are the fastest growing segment of the $3.7 trillion IRA market according to a statement from PENSCO Trust Company. The company reports that approximately 75 percent of new retirees roll retirement funds from 401(k) accounts into IRA accounts they control and can diversify beyond traditional equities and mutual funds. Accountants and other financial planners can find out more about these increasingly popular accounts at the National Symposium on Self-Directed IRAs being held October 20 and 21 in San Francisco, California.

“Most of this country’s wealth is in real estate and small business ownership,” Tom Anderson, Founder of PENSCO Trust Company says in a statement announcing the symposium. “And investors over 40 are clamoring for the tax benefits of holding their tangible assets in IRA accounts.”

Writing for ThirdAge, Bankrate.com describes self-directed IRAs as accounts set up at any brokerage where the beneficiary is responsible for “deciding how the money will be invested – stocks, bonds, mutual funds, certificates of deposit, even real estate.” The Wall Street Journal concurs, saying account owners can invest in just about any type of asset other than life insurance or collectibles.

Until recently the list of things account holders couldn’t invest in also included stocks that are not publicly traded. A recent U.S. Tax Court ruling, Ancira v. Commissioner, 119 T.C. however, found that equities that are not publicly traded can be held in self-directed IRA accounts according to the Motley Fool. The case in question involved the purchase of common stock in a company that was not publicly traded according to court documents, The record shows that the petitioner, Ancira, arranged for the respondent, the brokerage that was custodian of his self-directed IRA, to send him a check payable to the company whose stock he wished to purchase. He sent the check to the company and the company, in turn, issued stock in the name of Ancira’s IRA. Although the respondent determined the check was a distribution from Ancira’s IRA and subject to penalties and taxes, the Tax Court disagreed. The Court ruled that the petitioner, Ancira, had merely acted as a conduit for the investment, and therefore no distribution was taken and no taxes or penalties were owed. Despite the ruling, stock in a sub-chapter S corporation is still off-limits according to Anderson.

The Wall Street Journal reports that many self-directed accounts and the investments they contain are potentially at risk because IRAs are supposed to provide for future retirement not current needs. If the Internal Revenue Service (IRS) determines an asset is currently in use and the account holder is not of at least minimum retirement age, the IRA could be disqualified resulting in big tax bills and expensive additional penalties, according to the Wall Street Journal.

“A lot of people are going to get themselves in trouble and wind up losing their IRAs over this,” Ed Slott, an IRA consultant in Rockville Centre, New York, told the Wall Street Journal.

Despite the risks, the self-directed IRA market offers significant opportunities for CPAs with expertise in this retirement niche to increase fee revenues, according to Anderson. Few CPAs understand the rules and tax issues associated with self-directed IRAs, which is why PENSCO has put together the country’s first National Symposium on Self-Directed IRAs to educate professionals including CPAs, CFPs, attorneys and real estate professionals. The nation’s top IRA expert, Ed Slott is the keynote speaker. The Symposium will also feature 23 speakers covering four tracks:

  • Finance (tax and financial)
  • Business Development (marketing strategies)
  • Investment Strategies (real estate and other options)
  • Legal Considerations

Continuing education credits for CPAs are available. For more information or to register for the Symposium visit http://www.penscotrust.com/symposium/2005_Symposium.asp.

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