Money Investing megathread extravaganza - Page 891

**DaFace** · 06:35 PM

A place to talk about investing stuff.

**lewdog** · 03-16-2023, 07:56 PM

I'm thinking of doing a ROTH conversion in my wife's IRA account. It's roughly $20k so I'd have to pay taxes on it. Still seems worth it right and would I have to pay estimated taxes on that or can I just roll it into next year's taxes?

**Rain Man** · 03-16-2023, 07:58 PM

Quote:

Originally Posted by lewdog

I'm thinking of doing a ROTH conversion in my wife's IRA account. It's roughly $20k so I'd have to pay taxes on it. Still seems worth it right and would I have to pay estimated taxes on that or can I just roll it into next year's taxes?

I'm no accountant, but I wouldn't see any need to pay estimated taxes unless the conversion would put you out of the withholding safe harbor and cause tax penalties.

DRU · 03-16-2023, 08:58 PM

Anybody in here doing anything with real estate syndications and/or private lending?

We put some cash into a syndication deal last year that purchased some very large apartment complexes. We get monthly 10% distributions (cashflow), and we also get a K1 that shows paper losses which offset the income we're generating, so the income we make from the deal is completley tax free.

Separate from that we are now doing private lending deals as well. So we're earning 10%+ interest payments on those deals monthly, and again, the income from these deals is offset by the K1 losses from the syndication, so it's all tax free income as well.

When the syndication closes we would have to recapture the depreciation, but you can do a 1031 exchange into a new syndication just like any other RE deal. This defers the tax, gives us even more K1 paper losses from the new deal, and allows us to continue earning monthly distributions from syndications and private lending deals tax free.

When we die our beneficiaries get a "step up" in basis the same as any property we pass to them outright, so they won't have to pay any of the taxes from all those years we've been deferring.

They could continue where we left off, and keep moving into new deals to continue getting more tax free cash from them, or they could exit and only pay a small tax on the little gain they may have had after the step up in basis.

It's giving us most of the benefits of RE without any of the hassle! I don't have to shop for deals, negotiate, manage properties, service loans, or any of the stuff that comes with RE investing.

The only thing we don't get (because we chose the higher cash flow option) is equity growth on the back end when the deal closes. We just get our initial principal back.

However, we still have active income as well, so we're taking the tax free passive income we're getting from these deals and throwing it all into a ROTH where we're DCAing into index funds (and some individual stocks.)

Of course, that will all be 100% tax free as well, and in theory will give us the growth factor that we aren't getting from the syndication itself.

Again, we could choose to take less cash during the holding period and then get part of the equity growth from the syndication, but I prefer the cashflow right now.

I'm loving it so far, but would appreciate any feedback others might have that are already further down this road than we are.

**Buehler445** · 03-17-2023, 06:27 AM

Quote:

Originally Posted by lewdog

I'm thinking of doing a ROTH conversion in my wife's IRA account. It's roughly $20k so I'd have to pay taxes on it. Still seems worth it right and would I have to pay estimated taxes on that or can I just roll it into next year's taxes?

20K would likely expose you to an underpayment penalty.

I don’t know what the fee structure looks like, but usually the most cash flow effective thing to do is make an estimate in January. The easiest thing to do is have the rolling company withhold some on the roll.

The simplest thing to do is pay the penalty. I don’t know what that looks like though. The ones the software calculated for me have been pretty little. But I know you’re a cheap ass so I’d probably make an estimate.

**lewdog** · 03-17-2023, 07:45 AM

Quote:

Originally Posted by Buehler445

20K would likely expose you to an underpayment penalty.

I don’t know what the fee structure looks like, but usually the most cash flow effective thing to do is make an estimate in January. The easiest thing to do is have the rolling company withhold some on the roll.

The simplest thing to do is pay the penalty. I don’t know what that looks like though. The ones the software calculated for me have been pretty little. But I know you’re a cheap ass so I’d probably make an estimate.

So this is Vanguard. Can they withhold some of the rolloever to pay the taxes? I just don't want to mess up some of the leg work here as I do my own taxes in Turbotax each year.

Jenson71 · 03-17-2023, 08:13 AM

Quote:

Originally Posted by lewdog

So this is Vanguard. Can they withhold some of the rolloever to pay the taxes? I just don't want to mess up some of the leg work here as I do my own taxes in Turbotax each year.

This Vanguard article indicates that while you can withhold some of the rollover, it would be better to pay an estimated tax out of a nonretirement source like cash savings in order to keep the Roth account at its maximum: https://investor.vanguard.com/invest...rom-an-advisor

So rather than withhold 10%, make a quarterly estimate payment of $2k at the time of the rollover.

**Buehler445** · 03-17-2023, 08:22 AM

Quote:

Originally Posted by lewdog

So this is Vanguard. Can they withhold some of the rolloever to pay the taxes? I just don't want to mess up some of the leg work here as I do my own taxes in Turbotax each year.

They should. But I've never done it so I can't verify 100%, but it is a common thing.

**petegz28** · 03-17-2023, 08:25 AM

Quote:

Originally Posted by lewdog

I'm thinking of doing a ROTH conversion in my wife's IRA account. It's roughly $20k so I'd have to pay taxes on it. Still seems worth it right and would I have to pay estimated taxes on that or can I just roll it into next year's taxes?

Man up! Roll this shit over and prepare to pay your taxes out of a taxable account when you file. WTF would you mess with filing an estimate when in the end you're going to pay whatever it is you have to pay and you have until then to pay it?

**Buehler445** · 03-17-2023, 08:28 AM

Quote:

Originally Posted by Jenson71

This Vanguard article indicates that while you can withhold some of the rollover, it would be better to pay an estimated tax out of a nonretirement source like cash savings in order to keep the Roth account at its maximum: https://investor.vanguard.com/invest...rom-an-advisor

So rather than withhold 10%, make a quarterly estimate payment of $2k at the time of the rollover.

Ah, yeah, that makes some sense the IRS would care how the funding is done.

I think you just print a voucher and mail a check and there should be a place on TurboTax to enter payments.

The other option is to withhold an additional amount on your W-2.

**Buehler445** · 03-17-2023, 08:28 AM

Quote:

Originally Posted by petegz28

Man up! Roll this shit over and prepare to pay your taxes out of a taxable account when you file. WTF would you mess with filing an estimate when in the end you're going to pay whatever it is you have to pay and you have until then to pay it?

Because you'll pay a penalty.

**petegz28** · 03-17-2023, 08:30 AM

Quote:

Originally Posted by Buehler445

Because you'll pay a penalty.

Why would he pay a penalty?

**Buehler445** · 03-17-2023, 08:35 AM

Quote:

Originally Posted by petegz28

Why would he pay a penalty?

Underpayment Penalties exist.

https://www.investopedia.com/terms/u...ets%20annually.

**petegz28** · 03-17-2023, 08:37 AM

Quote:

Originally Posted by Buehler445

Underpayment Penalties exist.

https://www.investopedia.com/terms/u...ets%20annually.

If he does a rollover today he has 60 days to put it into a Roth and he has until April 15th, 2024 to pay the taxes on it.

What am I missing?

**Buehler445** · 03-17-2023, 08:39 AM

Quote:

Originally Posted by petegz28

If he does a rollover today he has 60 days to put it into a Roth and he has until April 15th, 2024 to pay the taxes on it.

What am I missing?

It won't be a penalty for pulling out of a 401K. The income will be taxable with no withholding against it. Accordingly, he will potentially have exposure to an underpayment penalty.

**petegz28** · 03-17-2023, 08:42 AM

Quote:

Originally Posted by Buehler445

It won't be a penalty for pulling out of a 401K. The income will be taxable with no withholding against it. Accordingly, he will potentially have exposure to an underpayment penalty.

Follow me here....

Rolls over to Roth

Claims on tax returns

Tax return says you now owe $X

Pays tax bill for $X

Paying estimated taxes is just that, estimated. At the end of the day you have until April 15th of whatever year to true up what you owe or don't owe.

So why not leave the money he is going to pay the tax bill with in an account earning 4% for the year and then pay when he has too?

No one is going to come knocking on his door for any tax payment until April 16th, 2024.

06-27-2016, 11:23 AM
DaFace Kind of a mod Join Date: Aug 2005 Location: Donkey Land Casino cash: $-63101	Investing megathread extravaganza A place to talk about investing stuff. Last edited by DaFace; 02-19-2021 at 06:35 PM..
Posts: 52,578

03-16-2023, 07:56 PM	#13351
lewdog Mod Team Join Date: Sep 2011 Location: Valley of the hot as **** Casino cash: $-148100	I'm thinking of doing a ROTH conversion in my wife's IRA account. It's roughly $20k so I'd have to pay taxes on it. Still seems worth it right and would I have to pay estimated taxes on that or can I just roll it into next year's taxes?
Posts: 46,167

03-16-2023, 08:58 PM	#13353
DRU To the Game Join Date: Oct 2003 Casino cash: $7043516	Anybody in here doing anything with real estate syndications and/or private lending? We put some cash into a syndication deal last year that purchased some very large apartment complexes. We get monthly 10% distributions (cashflow), and we also get a K1 that shows paper losses which offset the income we're generating, so the income we make from the deal is completley tax free. Separate from that we are now doing private lending deals as well. So we're earning 10%+ interest payments on those deals monthly, and again, the income from these deals is offset by the K1 losses from the syndication, so it's all tax free income as well. When the syndication closes we would have to recapture the depreciation, but you can do a 1031 exchange into a new syndication just like any other RE deal. This defers the tax, gives us even more K1 paper losses from the new deal, and allows us to continue earning monthly distributions from syndications and private lending deals tax free. When we die our beneficiaries get a "step up" in basis the same as any property we pass to them outright, so they won't have to pay any of the taxes from all those years we've been deferring. They could continue where we left off, and keep moving into new deals to continue getting more tax free cash from them, or they could exit and only pay a small tax on the little gain they may have had after the step up in basis. It's giving us most of the benefits of RE without any of the hassle! I don't have to shop for deals, negotiate, manage properties, service loans, or any of the stuff that comes with RE investing. The only thing we don't get (because we chose the higher cash flow option) is equity growth on the back end when the deal closes. We just get our initial principal back. However, we still have active income as well, so we're taking the tax free passive income we're getting from these deals and throwing it all into a ROTH where we're DCAing into index funds (and some individual stocks.) Of course, that will all be 100% tax free as well, and in theory will give us the growth factor that we aren't getting from the syndication itself. Again, we could choose to take less cash during the holding period and then get part of the equity growth from the syndication, but I prefer the cashflow right now. I'm loving it so far, but would appreciate any feedback others might have that are already further down this road than we are.
Posts: 2,124

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