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The LLC Appraisal Rules in Plain English Basic Rule: The value of each individual asset within the self-directed IRA LLC is required in order to determine the total value of the LLC. What is a checkbook IRA? In order to better understand why each asset within the LLC must be individually valued, let's review some basic definitions and history so that we are moving forward with the same fundamental understands. A self-directed IRA account that is the owner of a Limited Liability Company (LLC), is a taxadvantaged retirement account. It allows the account holder to pick his own investment assets. The investments selected need not be traditional assets such as stocks, bonds, and mutual funds. The assets selected for the checkbook IRA account can be "non-traditional" or "alternative assets". Examples of alternative assets are: real estate, promissory notes, private placements, an LLC and other businesses. What is an LLC? To summarize, an LLC is a separate legal entity whose tax liability passes through to the owners of the LLC. The IRA is the sole owner an LLC. Simply put, in the past your IRA may have owned stock in Target or Ford, but it now owns stock or units in an LLC. In fact it owns all of the stock or units of the LLC. A self-directed checkbook IRA, should not to be confused with a self-directed brokerage IRA account which invests only in stock, bonds and mutual funds. A value of each asset within the LLC is required in order to determine the value of the LLC. Real estate asset, promissory notes, private placements, tax certificates, tax deeds, etc. are each specific types of assets and must be appraised by a qualified third party appraiser using the same standards as it would use if it were directly owned by the IRA. Other assets, such as bank or brokerage accounts should have year end statements proving their value and will not require a third party appraisal. Who is responsible for providing the third-party appraisal of the checkbook LLC assets?


The IRA account owner is responsible for obtaining the appraisals. The IRA is responsible for paying the appraisers. A short explanation why the appraisals are required: "it's the law". How often are the appraisal reports required? Answer: Annually Internal Revenue Code Section 408(a)(3) TITLE 26, Subtitle A, CHAPTER 1, Sub-chapter D, PART I, Sub-part A. is the controlling IRS Code Section. One of the requirements that the administrator of your checkbook IRA account places on you is that you must submit a fair market valuation of assets owned by your IRA annually. Below is a direct quote from an IRA Custodial Account Agreement: The 5305-A, "IRA Custodial Account Agreement" states the following: 5.02 The Custodian or Administrator agrees to submit to the Internal Revenue Service (IRS) and Depositor the reports prescribed by the IRS. In the case of reports on form 5498, the Depositor agrees that Depositor is responsible for providing an annual report to Custodian or Administrator of the fair market value of all assets in any Custodial Account as of the last day of any calendar year, and that if Depositor fails to provide such fair market value information, that Custodian or Administrator shall issue a report on form 5498 to the IRS using the acquisition price of the assets in question. The IRS will be auditing self-directed IRA custodians in the near future and you will be required to provide satisfactory evidence of fair market value for us to file Form 5498 on behalf of your IRA. It is our job to maintain the tax-deferred status of the account by fulfilling this requirement.

Lawrence Tepper specializes in: Promissory Note Consulting, Valuation, and Appraising Expert Witness----Expert Consulting Services EDUCATION AND TRAINING Law Degree /Accounting Minor University of Denver Colorado Real Estate Broker-- Promissory Notes Specialization Certified Commercial Investment Member From National Assoc. Realtors PRACTICAL EXPERIENCE 35 + years of note experience for Attorneys, CPA's, Estates, and Financial Planners. http://promissorynoteappraisers.com/


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