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Using IRA to buy mortgage

I have $250,000 in an IRA Bank CD which will be maturing soon. I am age 65. I would like to reinvest the money in something that will pay me a return of at least 3%.

Our son has a 30-year mortgage on his home which has a balance of roughly the same amount I have in my IRA CD. He would like to renegotiate his loan for the lowest possible rate and smallest closing costs.

Is there a way for me to use my $250K IRA to acquire his mortgage while leaving the money as an IRA, perhaps as a self-directed IRA? I would restructure his loan to be a 15-year and have him make payments to me on the note at an interest rate of 3%. I would pay tax on the payments he makes to me, which would effectively be distributions from the IRA, and I'm pretty sure those amounts will be more than the RMD I would have to take starting at age 70.5.

Is this even remotely legal and feasible?

Reply to
Fred
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I believe this would be disqualified as a transaction that's not "arm's length."

It's possible to use a self-directed IRA to make private loans. Not to my taste or risk level, but possible. Making the loan to your son makes the transaction an IRA-breaker.

Reply to
JoeTaxpayer

It's not that it is "not at arm's length" that makes the transaction prohibitive. Loans can be made from an IRA. They just can't be made to yourself, spouses, parents, children, and grandchildren. If you do that, the whole IRA is treated as if it was all distributed.... it all becomes taxable.

Reply to
Alan

There are a lot of investmants that pay more than 3%. AT&T for example or Phillip Morris.

Reply to
X

Doesn't spouse/child/etc = not arm's length?

Reply to
JoeTaxpayer

No. "At arm's length" means at terms which two disinterested parties would conduct the transaction. In this case, if 3% is near market rate for a mortgage, then the transaction is "at arm's length" regardless of who the parties are. For this transaction to pass muster within an IRA, it can't be to a related party.

Ira Smilovitz

Reply to
ira smilovitz

conduct the transaction. In this case, if 3% is near market rate for a mortgage, then the transaction is "at arm's length" regardless of who the parties are. For this transaction to pass muster within an IRA, it can't be to a related party.

Much appreciated. I stand corrected, and a bit smarter than I woke up this morning.

Reply to
JoeTaxpayer

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