Investments in Real-Estate?

[Guest rachd]

The plan has most of its investments in a mutual fund company. Two of the trustees have decided to invest their own retirement money in investments outside of the mutual fund company. (Plan doc allows for other investments as approved by the trustees). One is now wanting to invest in some apartments- are there specific forms/paperwork that the DOL requires to include real estate as part of plan assets? I've been assured that this investment can be valued annually.

Thanks in advance for your help.

Rachel

[WDIK]

For starters, there are disclosures on Form 5500. There may also be issues with unrelated business taxable income which are reported on Form 990-T.

You might want to look at previous threads that discuss the pros and cons of investing retirement plan assets in real estate.

[Kirk Maldonado]

Watch out for prohibited transactions too.

[mbozek]

The clients should have the RE purchase reviewed by a tax advisor to see if makes sense. Investment of plan assets in RE results in loss of cap gains tax rate of 25%, and loss of deductions for depreciation, expenses of maintaining property, e.g., ins., property taxes, utilities, legal fees, interest, etc.