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Taxes on Borrowed (Leveraged) Funds?

August 31, 2014 by John Park Leave a Comment

Here is clear distinction between an IRA and a 401(k).  If an IRA leverages (borrows) funds to purchase an investment, there will be taxes (UDFI) due on the profit with the investment which is attributable to leveraged funds.  With the 401(k) purchasing real estate (only) with leveraged funds, no such taxes on profits utilizing leveraged funds is applicable.  Therefore, UDFI does not apply.  This is a tremendous benefit of a 401(k) over an IRA IF the account owner is wishing to leverage investments.

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About John Park

John

As co-founder of Fulcrum Self-Directed, John Park believes in the power of self-directed plans tempered by the individual responsibility to operate the plan in compliance with IRS and DOL regulations. As such, Fulcrum Self-Directed is in a unique position to assist a client in establishing an IRS compliance self-directed plan, while guiding clients with their responsibility to operate and administer their plan.

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