Using a self-directed IRA to buy vacation condo, rent it out to an LLC for
Let's say I have k in a 401(k). I know there are benefits and drawbacks to buying property with a self-directed IRA.
If I buy a condo in a vacation/rental area with the IRA for k, the IRA then leases the condo to an LLC for /year. The LLC is responsible for paying the taxes, insurance, condo dues, cleaning, maintenance, etc. The LLC collects the operating income to pay for these things. Thus the LLC gets the tax deductions of the expenses offset by income. The owner of the LLC gets the profit. Does this work?
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I don't quite understand your thought process here. First, in a tax-advantaged retirement account you are NOT allowed to engage in a transaction with yourself.
If you just want to run a business and be able to write off expenses, how is using the self-directed IRA relevant?
You can either buy the condo using your tax-advantaged account and rent it out to regular tenants. Or you buy the condo yourself using your own money and then operate your business so you can deduct business expenses from doing so.
401k's allow you to take a loan out of it, so you can look into that as well.
Self directed IRAs have rules to prevent self-dealing of this sort called "prohibited transactions". You can't buy or sell or lease assets or obtain services from anyone closely linked to you or any beneficiaries of the IRA. You can't loan yourself money from the IRA, and you can't deliberately take the proceeds that should be going to your self directed IRA and give them to another account that you own.
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