Real Estate...PT ?

[K-t-F]

Cleint wants to invest plan $$ in undeveloped land. Property can be purchase outright ($30K parcels, no mortgage). KICKER... he is the agent and will receive a commision... I am sure this is a PT... I typically advise clients to not invest in Real Estate... this one is adamant.

Questions.... Transaction goes throught the usual RE course... Plan would purchase land, client himself would be agent for sale and receive a commision... PT right?

If there is a way how would it work?

[austin3515]

No way. This is the most classic example of a PT you could ask for. The only way is to not charge the Plan for a commission. He cannot receive anything on account of this transaction.

[Ron Snyder]

Pata-Of course it is a PT. Austin correctly suggested waiving the commission.

Lori-Find a haiku thread to post on. Your post is inappropriate here.

[Belgarath]

I'm impressed!

Of course, I've had a dislike for writing haiku ever since college, when my haiku came back from the professor with a comment, "too imaginative."

Funny thing, I'm still not to keen on professors, either...

[Belgarath]

Back to the PT issue - do you escape PT status just because no commission charged? By that I mean, is it automatic, or a facts and circumstances test? I find PT questions to be a very tricky subject, and I wasn't sure if merely receiving no commission would necessarily do the trick? (Maybe an overly obvious situation, but say his office had bonus points for numbers of sales - so even though no "commission" in the classic sense, still gets a trip to Florida, etc..)

A trip to Florida sounds pretty good right now, for those of us in the frozen North!

Thanks.

[Guest Gordy]

SALLY: I agree with Veba.

[mbozek]

The PT rules preclude acts by a fid who deals with the assets of a plan in his own interest. But If the plan writes a check to the seller for the full purchase price and the seller gives his personal check to the agent for the commisson have plan assets been used to benefit the agent? In other words once the plan funds are deposited in the seller's account they are no longer plan assets so any payment by the seller to the agent would not be a PT. The Question is whether the self dealing occurs when the agent signs the commisson agreement with the seller or when he is paid. In some states an oral agreement to pay a commisson to sell RE is binding.

[K-t-F]

Mbozek... that is interesting. But that describes a personal sale... a sale that doesnt wash through the agents real estate broker. I guess you could simply discount the sale the commision... but he may need the commision on the books. This guy is saying other agents are doing it... I told him I still think it is a PT.

[Guest Pensions in Paradise]

mbozek - yes, it still would be a PT. IRC 4975©(1)(F).