Property bought through an IRA

[ILLMAS]

TP bought a property using their IRA account, however in this case the IRA is the owner of the property and not the TP. TP was telling me that the amount they collect for rent goes straight to repay the IRA, however they are on the hook for expenses. Has anybody else ever counter a case like this that can guide as how to treat the property (Sch E) or is there a special form that needs to be prepared.

Thanks

MAS

[mlinder42]

I am not an expert but I think the expenses must be paid by the IRA. I think this is self dealing I would do some research to find out all the rules.The way he is doing it it makes no sense.Do they have a mortgage on the property?

[Lion EA]

Everything has to happen inside the IRA, income, expenses. And, he can't have any personal use. Only know some vague provisos, so please look up the rules if you're going to help this client.

[jainen]

>>the IRA is the owner.... they are on the hook for expenses<<

They have no obligation to pay expenses on property owned by a separate entity. At best they could call this investment expense on Schedule A (2% AGI).

Unless, on the other hand, there happens to be a mortgage! In that case the IRA has been completely distributed, with tax and penalty owing. But at least they would then be able to file Schedule E.