IRA411
Valuations & Worthless Assets
S
by Kaaren Hall, President of uDirect IRA Services
elf-Directed IRAs are a useful tool for
retirement savings. Like any good tool, it
works best when you know how to work
it. From time to time the investments our
account-holders make go bad. It happens.
Risk is always a part of investing. When this
happens what should you do?
It’s not just a matter of sending an e-mail to your cus-
todian saying the asset in your Self-Directed IRA has no
value. The IRS is going to want proof that it’s valueless.
Your Self-Directed IRA custodian cannot determine the
value of your assets. You need a third-party valuator’s
professional report.
We had an account holder (we’ll call him Fred) with
Realty411Guide.com
such an asset. His IRA made a Note and the borrower
did not repay the debt. After quite some time (and after
receiving no account fees from him) we advised Fred
we would distribute the asset to him at the last known
value and close his account. Imagine that: Being taxed
for the full value of an asset when that asset is actually
worthless! Truth is, he wanted the account closed so this
seemed to solve a problem for him, but the problem was
not solved.
The rules are clear: Assets must have a fair market
valuation when taxable events occur. To get this kind of
valuation you need to seek the help of a valuator. If the
asset is real estate then often an appraisal will do. In
lieu of this kind of third-party authenticated value all >
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