cancel
Showing results for 
Search instead for 
Did you mean: 
Highlighted
Level 1

How do I record appreciation of real property in an IRA LLC?

I'm using QuickBooks Online to help manage my IRA LLC, which invests in rental real estate. The LLC is owned by my non-Roth IRA and I am its manager and sole member. The LLC has its own bank account and there can be no co-mingling of my funds with its funds per IRS rules. I receive all income, pay all expenses, and make all purchases exclusively via check, wire, or debit card through the LLC's account, which is connected to QBO. Everything happens without income tax consequences until LLC assets are liquidated and the money is returned to the IRA and withdrawn, at which point it is taxed as regular income. I am using QBO Simple Start, since LLC will only have one property for the foreseeable future, and I don't see the need for Classes, etc, since everything is funneled through the bank account (which works great!) and there is zero tax accounting to worry about.

 

Everything seems to be working out, but I am required to do an annual report to my IRA custodian of the Fair Market Value (FMV) of the LLC, which they in turn report to the IRS. FMV is supposed to be "the amount at which property [the LLC] would change hands between a willing buyer and a willing seller, neither being under compulsion to buy or sell and both having reasonable knowledge of the relevant facts".  Certainly one "relevant fact" is the value of the rental property, so I would like to keep track of this in QBO also, by adding a once-a-year transaction of the amount the property has appreciated (hopefully) or depreciated (hopefully not). 

 

What would be the appropriate QBO transaction to do this? I have an asset account for the property, but what account would be appropriate for the other side of the transaction? Would that account be the same if value goes up or down? Can I make the amount show up as a line item on the Balance Sheet or similar report? Is anyone else out there using QBO (Simple Start or other) to manage an IRA LLC? Any help appreciated, thanks!

Solved
Best answer December 29, 2019

Best Answers
Highlighted
Level 15

How do I record appreciation of real property in an IRA LLC?

You should have the property listed as a fixed asset, with an associated accumulated accumulated depreciation account

 

Create two new accounts

fixed asset sub account of the property named unrealized gain/loss
an equity account named unrealized gain/loss

 

at year end get the appraisal for market value.

do the math, (market value less mortgage payoff) less book value (cost less accumulated depreciation )

 

then a journal entry if the amount is positive

debit fixed asset unrealized gain/loss, and credit equity unrealized gain/loss

reverse that if the amount in negative

View solution in original post

4 Comments 4
Highlighted
Level 15

How do I record appreciation of real property in an IRA LLC?

You should have the property listed as a fixed asset, with an associated accumulated accumulated depreciation account

 

Create two new accounts

fixed asset sub account of the property named unrealized gain/loss
an equity account named unrealized gain/loss

 

at year end get the appraisal for market value.

do the math, (market value less mortgage payoff) less book value (cost less accumulated depreciation )

 

then a journal entry if the amount is positive

debit fixed asset unrealized gain/loss, and credit equity unrealized gain/loss

reverse that if the amount in negative

View solution in original post

Highlighted
Level 1

How do I record appreciation of real property in an IRA LLC?

Thanks for your answer, it seems right!

 

Just to clarify: Amount is positive if there is appreciation, debit fixed asset unrealized gain/loss, and credit equity unrealized gain/loss. Amount is negative if depreciation, reverse accounts.

Highlighted
Level 1

How do I record appreciation of real property in an IRA LLC?

Rustler, I have a similar situation, however, I have stopped the rental and have shutdown the business LLC. We registered the value with the 3rdParty Administrator and took it as a distribution from the IRA. What closing entries are required for the tax reporting for the Equity and Accumulated depreciation accounts?

Highlighted
Level 1

How do I record appreciation of real property in an IRA LLC?

I have a similar situation except I have now closed the LLC and taken the value of the property as a distribution from the IRA. What entries do I need for the closing of the accumulated depreciation and the equity accounts?

Need to get in touch?

Contact us