Their assertion that this affects low and middle income people is absurd.
Self directed IRAs under attack in proposed tax bill
51–60 of 306 posts
Re: Self directed IRAs under attack in proposed tax bill
#52Earlier quoted context omitted.
Is this really an issue for low- to middle-income earners, or is that just a scare tactic?
It’s a scare tactic. These rules are really aimed at people Peter Thiel, in response to the pro public’s investigation - they don’t even hit other famous IRA (ab)users like Mitt Romney. But getting you angry enough to defend his wealth is much more difficult than obscuring the fact that you won’t be affected by them, so we instead get vague and scary warnings about the bill.
They can easily stop the next Pete Thiel by capping the appreciated IRA balance which they have in fact added a provision for. I don't comprehend the scare tactic of killing the self-directed IRA.
Re: Self directed IRAs under attack in proposed tax bill
#53Presumably meant to address high net worth individuals completely dodging taxation on huge gains by using their IRAs for investments like exercising early-stage stock options.[1] I kind of wish they'd go with just capping the gains, but would I still say that if I wasn't planning to use mine to "fund" high-return cryptocurrency arbitrages? 1) https://www.forbes.com/sites/sarahhansen/2021/06/24/peter-th...
I'm actually pretty fiscally conservative but I think it's ridiculous that someone abused the intent of a Roth IRA by accumulating $5 billion into it.
The whole purpose of IRAs is to encourage regular people to save for retirement. It was not meant to provide billionaires tax loopholes to avoid paying millions or even billions of dollars in taxes.
It's kind of like playing a game with someone. 99% of the people are following the rules and then some weisenheimer comes up with an idea that while technically not breaking a rule goes against the spirit of everything that the game stands for. What happens in that instance is the other players of the game will say, "Nice try, but no." This is what Congress is doing.
Re: Self directed IRAs under attack in proposed tax bill
#54> Under these provisions, you would no longer be allowed to invest your IRA into private placements and single-member LLCs, regardless of your level of income or wealth.
> This will result in significant tax consequences for many people, including low and middle-income investors.
BS! In order to legally invest in private placements, you must be a "accredited investor" which means you earn over $200k individually or $300k jointly. If you're making over $200k, you're not middle class AT ALL. You're solidly in the top 10% of the country and likely much higher. This provision will have almost zero impact on middle class America
Re: Self directed IRAs under attack in proposed tax bill
#55Self directed IRAs are commonly used with a wholly owned single member LLC to invest IRA funds into real estate related investments such as rental properties or many other types of private investments. The new proposed tax bill seems to remove the ability of the IRA owner to manage that LLC and effectively end the use of checkbook control IRAs.
Is this really an issue for low- to middle-income earners, or is that just a scare tactic?
Given the relatively low cap on IRA contributions, it's not directly an issue of income, but rather your access to high-return investments like early-stage stock options.
Of course, someone with lots of investments will have the luxury of just making the highest-payoff ones with their IRA funds.
Independently, in the rest of the bill [1] there are lots of reasonable things like a $10 million IRA cutoff limit.
1) https://www.advantaira.com/wp-content/uploads/2021/09/WM-Tax...
Re: Self directed IRAs under attack in proposed tax bill
#56So, progressively since probably the 1980s (maybe earlier?) Australia has introduced a system called "superannuation" (or just "super" for short). There are two parts to this:
1. Mandatory contributions: currently 10% of your income; and
2. Voluntary contributions: you can contribute more and get a lower tax rate for doing so. By comparison, 401k contributions are tax free. Voluntary super contributions are not.
This is intended to fund people's retirements to alleviate the upcoming strain on the Aged Pension just like the issues with Social Security. That is, in 10-20 years there'll be Australia's super requirements are stricter (eg currently you cannot withdraw before 65; 401k is 59.5). There are other differences.
Anyway, super is generally in mutual funds and the like. But there is an option for Self-Managed Super Funds (SMSFs).
This is where you can basically run your own fund. You need to get audited, pay fees, have an investment strategy, etc. Generally these are used to invest in things you can't through mutual funds. And this is abused to invest in residential real estate (because, you know, it always goes up).
I generally think this system has been a disaster and shouldn't be allowed. It's to protect people from themselves, basically.
For example, super investments can't be leveraged but through SMSF shenanigans I've seen balances wiped out by effective leveraging.
Also, you'll see marriages where one spouse's super balance is used by another in a bad manner and then the marriage breaks down and this just adds to the financial disadvantage and stress of that spouse. I imagine this is particularly an issue in the case of psychologically abusive marriages.
So I'm for any reform that restricts IRAs and 401ks from these one man shops.
Re: Self directed IRAs under attack in proposed tax bill
#57Just so people are aware, high income individuals can’t use IRAs. This is a direct action against middle to low income individuals.
https://www.irs.gov/newsroom/new-income-ranges-for-ira-eligi...
Re: Self directed IRAs under attack in proposed tax bill
#58Earlier quoted context omitted.
This has no impact on the average person in the low to middle class income range. This is just a loophole allowing the rich to put a bunch of money into their IRAs and watch it grow in a tax advantaged way. The average person that's putting the max of $6k (or less) into their IRA is not impacted by this and it's business as usual for them. I believe this is in response to people like Peter Thiel https://www.propublic…
Does the fact that more rich do it mean it's wrong? Or that low and middle income should use it as a model and the practice should be encouraged? I mean, if private citizens can build themselves up without being beholden to social security and Wall Street - why is this bad? What if - instead of the government keeping us to the lowest common denominator (social security) they encourage, educate, and allow everyone to…
No one's saying you can't get rich. You have to pay taxes on the gains.
Re: Self directed IRAs under attack in proposed tax bill
#59The whole article is predicated on the lie that low and middle income earners are buying private placements and LLCs in their IRAs. They are not. Full stop.
The whole deal is a 'we are spending tons of cash, so we need to take it from someone' plan. This isn't a "watching out for the average person" deal.
Re: Self directed IRAs under attack in proposed tax bill
#60Presumably meant to address high net worth individuals completely dodging taxation on huge gains by using their IRAs for investments like exercising early-stage stock options.[1] I kind of wish they'd go with just capping the gains, but would I still say that if I wasn't planning to use mine to "fund" high-return cryptocurrency arbitrages? 1) https://www.forbes.com/sites/sarahhansen/2021/06/24/peter-th...
Oh actually, if you go and read the bill text they link, there is in fact a cap at $10m along with other measures to close up loopholes. Starting at section 138301.
https://www.advantaira.com/wp-content/uploads/2021/09/WM-Tax...