returning home profits to Roth IRA

[Guest hannidan]

I'm just starting to study Roth IRA's so please forgive me if this question is completely off the wall.

I've been told that it is possible to make the down payment on a home using Roth IRA funds... then after selling the home, (flipping it quickly for a profit) you can deposit both the original Roth IRA funds and the profits back into the Roth IRA without tax consequences. Does anyone know if this is possible? Thanks.

[John G]

Ah, there is always some factual element to these ideas that get passed around. But... to sum it up in one word: NO.

Yes, first time home buyers can tap their Roth IRAs to help buy a house. But they can't deposit the gain on the eventual sale.

Yes, there is a 60 day in/out option that most folks should never contemplate using because the downside of failing to get the funds back in 60 days is huge - a significant taxable event on the borrowed funds and they can never get back into the IRA... plus early withdrawal penalties to kick you while you are down.

Second point, it is very difficult to buy real estate via an IRA/Roth for many reasons. You can search "real estate" on this message board to more details.

Next point - "real estate bubble" - in many recent hot markets, real estate is not moving and some folks are now losing money on what they thought was sure thing. The greater fool theory applies - don't be the last guy to get on the bandwagon.

Best advice - forget this real estate idea. Forget any idea that involves big double digit returns.... they are rare, and short in duration.