dmwe Posted September 23, 2010 Posted September 23, 2010 I received an inquiry about whether or not we (I work at a bank) know of anywhere someone can open an IRA and use their funds to invest in cattle from a cattle feeder. I've been pondering the custodial aspects of such an investment but since it would be a short-term, 90-120 day type of investment, I'm not sure what requirements the regulations might specify. Has anyone heard of this type of investment being held in an IRA, or do you know of anyone who would accept a custodial arrangement for cattle?
Guest Sieve Posted September 23, 2010 Posted September 23, 2010 Why not? I would wonder, though, if there might be UBTI. And, Yes, there are custodians out there who will hold individually-directed & non-traditional investments in IRAs.
Ron Snyder Posted September 23, 2010 Posted September 23, 2010 Operating a business within an IRA is a tricky proposition. Some practitioners are doing it by setting up a separate corporation or LLC as the operating entity, with the IRA as the sole owner. However, IRS would likely see through this device.
mbozek Posted September 23, 2010 Posted September 23, 2010 I received an inquiry about whether or not we (I work at a bank) know of anywhere someone can open an IRA and use their funds to invest in cattle from a cattle feeder.I've been pondering the custodial aspects of such an investment but since it would be a short-term, 90-120 day type of investment, I'm not sure what requirements the regulations might specify. Has anyone heard of this type of investment being held in an IRA, or do you know of anyone who would accept a custodial arrangement for cattle? Is the IRA owner going to operate the business or is the owner going to be a passive investor? mjb
Peanut Butter Man Posted September 23, 2010 Posted September 23, 2010 I received an inquiry about whether or not we (I work at a bank) know of anywhere someone can open an IRA and use their funds to invest in cattle from a cattle feeder.I've been pondering the custodial aspects of such an investment but since it would be a short-term, 90-120 day type of investment, I'm not sure what requirements the regulations might specify. Has anyone heard of this type of investment being held in an IRA, or do you know of anyone who would accept a custodial arrangement for cattle? Is the investment purchasing shares in the LLC set up by the cattle feeder where the cattle are the assets in the LLC? Or is the investment purchasing a commodity option where the commodity is the cattle from the cattle feeder?
J Simmons Posted September 23, 2010 Posted September 23, 2010 My guess is that the IRA will purchase the cattle from the cattle feeder, who will continue to fatten up the actual cows, care for them, and haul them off to market, the net proceeds from which will belong to the IRA. If so, I see this as the IRA engaging in the operation of a business, and paying the cattle feeder for his services after the sale to the IRA, and thus UBTI results. This is different than buying commodity options where the risk is the general market value of beef. If a virus infected and killed these specific, say, 60 head of cattle, the IRA investment is wiped out, despite the commodity price of beef remaining within its normal fluctuation band. John Simmons johnsimmonslaw@gmail.com Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.
jpod Posted September 23, 2010 Posted September 23, 2010 Deals involving cattle, horses, unicorns, etc., almost always have some tax "shelter" element to them, legitimate or bogus, so if that's the case here an IRA is not the right source of investment dollars.
Guest Rajeev Posted September 27, 2010 Posted September 27, 2010 Yes this can be done, and I have had the experience in doing this is a few times over, but as mentioned by others, we have to consistently run the numbers to understand the tax impact both inside and outside the IRA (including UBTI), prior to the investment. To manage the risk associated with the issue pertaining to death, etc., there is insurance available to cover this issue, and such must be acquired, and added to the operating costs of the cattle. If you wish train yourself to the market value movements of cattle and cattle and other industry specific data, http://www.cattlefax.com is a good start (not the end all)...
dmwe Posted September 28, 2010 Author Posted September 28, 2010 Thank you for all of your insights. I think my bank will pass on this opportunity, but maybe he can find someone else to help him out.
david rigby Posted September 28, 2010 Posted September 28, 2010 I think this entire discussion is a bunch of bull. I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
Belgarath Posted September 28, 2010 Posted September 28, 2010 Merely trying to "steer" you in the right direction.
GMK Posted September 28, 2010 Posted September 28, 2010 Either we've had too much calf-ene, or we're just trying to milk this for all it's worth.
Belgarath Posted September 28, 2010 Posted September 28, 2010 Is a cow tht has had an abortion decalfinated?
jpod Posted September 28, 2010 Posted September 28, 2010 You guys are really milking this one for all it's worth.
masteff Posted September 28, 2010 Posted September 28, 2010 Someone should take this by the horns and close it down! Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra
GMK Posted September 28, 2010 Posted September 28, 2010 Someone should take this by the horns and close it down! I agree. Cream it into oblivion, Bos. It's becoming an udder waste of time.
masteff Posted October 1, 2010 Posted October 1, 2010 IMO it was best for the bank to not ride herd on this investment. Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra
Guest Rajeev Posted October 2, 2010 Posted October 2, 2010 Lets shut this down with the last word... that "milking a cash cow is better than taking a bull by its horns"...
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