How does self directed ira's save you capital gains??

I have been told if I put my money in an ira that is just used for real estate purchases and if money is used to buy real estate and then sold and the money put back into ira then you are not taxed capital gains on the sale. Is this correct ??? Help Anyone? Thx !!

If it’s a Roth IRA, your distributions are tax free regardless of how much profit you make.

If it’s a traditional IRA, you pay income taxes when you withdraw the money. There are no capital gains taxes and the account grows tax deferred.

Your IRA can only use non-recourse financing for purchases without subjecting it to a penalty and you are only allowed provide advisory services. You cannot do any work on IRA property and cannot use the property for your benefit. There are also restrictions for some members of your family and certain businesses you own.

First, capital gain taxes are usually LOWER than ordinary income taxes (I am assuming that if you have enough assets to purchase real estate investments then you are not “low income.”) So why would you want to avoid capital gains? You’d pay more in tax by converting the capital gain to ordinary income from IRA distributions.

however,

Flips get expensive because the IRA administrator will require that most of the paperwork be signed/handled by their office in the name of the IRA (not you). There are fees for this. Fees get worse if the administrator has to deal with rental income and expenses, which also have to be deposited/paid through their office.

A quality IRA administrator will look closely at the investment to make sure that it does not violate any related party restrictions. Most investments a “investor” would like to make will not be approved.

Self-directed IRA’s are great, though, for REITs and limited partnership equity investments, where the IRA only sends a check and gets a check. My wife and I use this strategy.