GAO on Self-Directed IRAs and ROBs

Our firm has been practicing in the federal tax area of self-directed IRAs and 401k plans used as business start-ups (commonly referred to as “ROBS”, AKA rollovers as business start ups) for over the past 10 years.  Little guidance has been forthcoming from the IRS or other governmental agencies, other than legal cases and certain published rulings and advisory opinions by the IRS and Department of Labor.

Recently, the Government Accountability Office (GAO) was asked to examine issues related to the potential risks and responsibilities associated with investments in unconventional assets using self-directed or “non-traditional” IRAs. This is the first public government study to come to light regarding non-traditional investments in IRA accounts.

In the report, the GAO made several recommendations to the IRS, including but not limited to improving Guidant for account owners with unconventional assets on monitoring for ongoing federal tax liability and to clarify how to determine the fair market value of hard to value unconventional assets.

The area of self-directed IRAs and ROBs structures is a complex area, and this report underlines and reinforces the importance of seeking competent, experienced counsel in this area, before one creates and invests into a structure, and before making continuing decisions after the structure is in place.

To view the full GAO report, click on the following link: