Actuaries Unlimited, Inc. Monthly Digest

Real Estate in a Qualified Retirement Plan

by Mindy Gassman, Enrolled Actuary, MSPA, CPC, MAAA on January 19, 2017

A qualified retirement plan may hold assets in the form of real estate. Owning real estate in a retirement plan can seem cumbersome initially. Before making a real estate purchase you should be aware of the following rules:

• The plan document must allow the plan to purchase real estate with existing plan assets.
• The plan may not purchase, sell, exchange or lease the real estate to a party in interest.
• The plan may not pay commissions or management fees to a party in interest.
• Income derived from a debt-financed property will generate Unrelated Business Taxable Income (UBTI).

Upon the purchase of real estate, other rules take effect.  Below are some guidelines to follow during the lifetime of the plan when maintaining real estate. These guidelines will help to avoid any prohibited transactions which would jeopardize the plan’s qualified status: Continue reading →

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