The Roth IRA is an amazing retirement vehicle. The contributions are NOT tax deductible HOWEVER
all profits generated are forever tax FREE.
So if you had $2,000 in a Roth and made an investment that generated $5 million in profits - NONE
would EVER be taxed. That’s right, when you started your retirement it all would be tax free, not tax
deferred like the traditional IRA.
How could you supercharge your Roth IRA with only, say $2,000 in it.
HOW ABOUT REAL ESTATE OPTIONS?
What if your brother invested in real estate and bought a property for $100,000 and you thought it
would bring $120,000 on the market thus making a $20,000 profit. Your Check Book IRA could give
your brother $2,000 (or any amount reasonable) for an option to buy the property for $108,000. This
would not be a prohibited investment of your IRA because the property is owned by a NON-related
party. Remember for purposes of the tax code your brother is NOT considered a related party.
- Now your brother has a profit of $10,000.
$108,000 Price received when the IRA exercises it’s option to buy.
$100,000 Cost of property
$ 8,000 Profit on sale
$ 2,000 Option premium received by your brother for selling the option
$ 10,000 Total profit to your brother
But your Checkbook IRA would have a gross profit of $12,000 and net of $10,000 after subtracting
the $2,000 paid for the option. That $12,000 would be instantly available to reinvest and would
NEVER BE TAXED EVER!
Options can be bought on just about anything. What if two brothers took turns selling real estate
options to each other’s Roth-IRA’s. What if you are a car or equipment dealer, livestock buyer,
mortgage or note buyer the list goes on!
