real estate in IRA with 72t

L1: real estate in IRA with 72tI have a client that has been on 72t for 7 years. they wish to use the IRA to purchase real estate. I have found a custodian that works in this arena, but would a transfer out of the current IRA account into another IRA that allows real estate purchases violate the 72t? Could they simply continue to take the total amount per the 72t out of the original IRA, or would this be considered a break in the 72t.
Essentially, is a partial transfer from one IRA to another IRA considered a break in the method.2005-12-02 12:26, By: irish, IP: [66.42.140.168]

L2: real estate in IRA with 72tHello Irish:
This is simply an IRA-to-IRA transfer which is permissible even though a SEPP plan is in progress. The corpus (IRA universe) for the SEPP plan now simply includes both IRAs.
That being said, investing in real estate insideof a set of IRAs that includes material real estate holdings is quadruply dangerous:
1. In general, investing in real estate inside of an IRAis not a good idea due to loss of deductions; e.g. depreciation and income recharacterization; e.g. the long term capital gain when the real estate is eventually sold is converted to ordinary income becuase its inside an IRA.
2. It is easy to (in)advertently execute a prohited transaction and/or related party transaction with real estate which, upon examination will always be treated as an improper contribution or distribution to the IRA.
3. Real estate automatically creates illiquidity in the IRA when the SEPP IRA needs the exact opposite.
4. Thekiller — inadvertently execute a prohibited transaction and the transaction itself will be disallowed and penalized and the entire SEPP distribution (because a modification will have occurred) from inception will be penalizedat 10% plus interest.
Now, despite these hurdles, go ahead and invest in real estate. However, as your client’s advisor I wouldthink about running the other way.
TheBadger
wjstecker@wispertel.net
2005-12-02 16:53, By: TheBadger, IP: [66.250.23.21]