Pundeff Adams represents investors in applying for prohibited transaction exemptions. The following are verbatim excerpts from a tentative authorization by the Employee Benefits Security Administration of a prohibited transaction (published on the EBSA website), in which an IRA was allowed to sell property to the IRA owner:
The Applicant represents that the proposed sale of the Property by the IRA to the Applicant will increase the liquidity of the IRA’s portfolio, will enable the IRA to diversify its assets, and will enable the IRA to sell an illiquid asset. The authorization by the DOL will be subject to the conditions described below.
Kristin P. Boardman
The Applicant is the IRA participant and a disqualified person with respect to the IRA. The Applicant will be bearing the costs of the exemption application.
Kristin P. Boardman IRA
The IRA is an individual retirement account, as described in section 408(a) of the Code, and was established by the Applicant in January of 2004. As of June 30, 2010, per the PENSCO Trust Company statement enclosed, the IRA had approximately $146,288.57 in total assets. The property was valued at $140,000 on January 12, 2010, by a licensed realtor . Since that time, an independent qualified appraiser has valued the property at $130,000 (as noted below, under “Proposed Property Transaction”). This would make the June 30, 2010 value to be actually $136,288.57. The PENSCO Trust Company, located in San Francisco, California, is the custodian of the IRA.
Proposed Property Transaction
On March 1, 2004, the IRA purchased the Property from James J. and Suzanne K. Jablonski, who were unrelated third parties, for $150,000 in cash. The Property represents over 95% of the IRA’s total assets. The Property is an approximately 1.2 acre parcel of unimproved land, legally known as lot 23 Fisher Point Subdivision, located at 222 Thurman Road, in Beaufort, North Carolina. The Property has not generated any income for the IRA since its acquisition. The Property was appraised on April 14, 2010, by an independent qualified appraiser, Bob Upchruch Appraisals, LLC. The appraiser determined the fair market value of the Property to be $130,000. The Applicant proposes that she purchase the Property from the IRA in a one-time cash transaction. Prior to consummation of the transaction, the appraisal will be updated by Mr. Upchurch, and the transaction will be conducted at the updated appraisal amount. The Applicant represents that the proposed transaction would be in the best interest and protective of the IRA because the IRA will be able to dispose of the Property at its fair market value and will not pay any commissions or expenses associated with the sale. In this regard, the Applicant will pay the IRA an amount in cash equal to the current fair market value of the Property at the time of the transaction as determined by a qualified independent appraiser.
Tentative Authorization of Proposed Transaction
. . .
The proposed transaction described in this notice has met the requirements for tentative authorization from the DOL under PTE 96-62. Unless the DOL otherwise notifies the Applicant, a final authorization would be effective October 27, 2010.
IRS CIRCULAR 230 DISCLOSURE: To ensure compliance with requirements by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.