Frequently Asked Questions

Providing clients with a disciplined approach to investing, a key differentiator at Riverplace Capital is our individuality of thought and hands-on money management which is done in-house. This is unique for firms of our size and separates us from the crowd.

Riverplace Capital researches and selects individual securities, building portfolios to meet each client’s goals and expectations. Many other firms use mutual funds or other structured products with their own fees. These fees subtract from your returns. (See Investing Process for more information).

We are also adept at developing tailored tax protection for your business and retirement planning. Unlike many firms, we select individual securities that are more tax-efficient than many financial products. We also plan the timing for buying and selling of those investments to best meet your tax needs.

Riverplace Capital has been serving clients in Florida and beyond for more than 20 years and has 100 years of combined financial expertise on our management team.

Riverplace Capital offers a wide variety of investment services and the ability to handle manifold asset management challenges.  We provide generalist services for a diverse clientele, including individuals, foundations, pension funds, non-profits and other small institutions.  We also have specialty capability in the following areas:

• Small &Medium businesses and their owners
• Real Estate professionals and Developers

Over the years, Riverplace Capital has assembled a vast number of other specialists with whom we work to help solve most any challenging situation.  These include:

• Estate Attorneys
• CPA, or other accounting services, including specialized areas
• Insurance specialists for specific needs
• Life care for elderly assistance and management
• Special needs experts
• Legal needs

Our long experience has enabled us to have access to the best in these areas. If you need a team of best-in-class professionals to consult with for your financial planning, Talk With Us!

Riverplace Capital wealth management firm is committed to service and performance excellence. We have experienced success working with clients for decades, but our approach isn’t for everyone.  Here is an overview on who we are NOT a good fit for:

• Clients with a short term investing time horizon. Riverplace Capital investing approach and research focuses on a 3-5 year time frame. We also seek to be tax efficient, looking for long term capital gains rather than shorter term results.
• Individuals who want the cheapest cost. We are competitive and more or less in the middle of the range in price for Registered Investment Advisory fees.  However, we include a number of services free which you may not want.
• You are not comfortable with a firm that does its own research and selects securities and builds portfolios designed to impact a certain strategy. Many other firms allocate to mutual funds and other structured products that may be well known.  These, however, have internal fees that are paid out of the portfolio that they manage. In addition, you pay the investment management firm for their services. Riverplace Capital does not do this.
• You think you want professional investment management expertise but have trouble relinquishing control. Riverplace Capital operates with full discretion. This is obviously guided by significant research and matched to align with your needs and risk tolerance. Once we agree on a strategy and goals, we do not consult with you on every buying or selling of securities for your account. We report monthly and produce a quarterly performance reports on your behalf, showing you how you are doing, with appropriate comparisons.
• If you require a lot of one-on-one meetings and live far from our office. We travel some as needed, and ensure each client receives top level service. But we cannot give the same close attention in person to clients at a distance as we can those closely located.  That said, we have many satisfied clients across the United States and are able to effectively communicate with them and meet their needs despite the distance. It is mostly a matter of your communication preference and style.

If you like working with a firm that does its own research and focuses on long term tax efficiency and capital gains, Talk With Us!

Riverplace Capital prides itself on our investing acumen and our long history of money management success.

We actively manage millions of dollars in investments for clients and have added value over time by exceeding benchmarks. Please refer to our supporting performance results history for more details.

With a disciplined approach to investing, our Finance Committee meets regularly to review, monitor, and adjust individual portfolios based on shifts in the market.

Of course, the most appropriate comparisons can be determined after we have consulted with you to determine your goals and risk tolerance. We create and oversee different strategies to meet the varying and specific needs of our clients.

To begin this process we work with you to develop a financial plan, a $1500 value which is free to all clients as part of our comprehensive menu of services.

At Riverplace Capital, when you engage us, you hire our expertise. Together we build a plan and identify an investment strategy. In doing so, we make every effort to understand your needs and concerns before we do anything. The time frame for your investments is an important consideration that is included every step of the process. Once established, we make every effort to meet your expectations in as responsible a manner as possible. Other considerations included in our planning are your risk tolerance, financial goals, and other investments.

Our team of advisors has more than 100 years of comprehensive financial experience and areas of expertise in a variety of areas including business ownership, retirement, 401k rollovers, real estate management, and estate planning.

If you need experts to guide you on the investment time and method that is best for you, Talk With Us!

There are many financial tools to consider when implementing an investment strategy. Some that have recently gained popularity are Index Funds, ETFs, and Factor Investing.

Index Funds

An index fund is a type of mutual fund with a portfolio constructed to match or track a market index, such as the Standard & Poor’s 500 Index (S&P 500). An index fund is said to provide broad market exposure, low operating expenses, and low portfolio turnover. For these reasons as well as others, over the past number of years index funds have become all the rage.  The calculation has been that because so many active managers could not outperform index benchmarks, then why not simply invest in the indices?  As long as markets were in up trends, this strategy worked pretty well.  However, in trading range markets like we are in 2019, these index funds simply track sideways at best.

During big drawdowns index funds must sell the underlying stocks to meet redemption requirements.  Since most indices are market-weighted, the biggest companies have the heaviest weighting; these stocks may drag down the entire index.

This is especially true when high-value stocks lose their cache or events go against them as has recently happened to some well-known tech and social media companies. While the former winners may be in downtrends, others may be emerging as new growth opportunities.  The indices still dominated by past winners will not reflect the growth occurring elsewhere.

ETF’s

Exchange Traded Funds (ETSs) are baskets of stocks. The basket may be an index, an industry or sector, or some other collection of companies.  Most of these are also market-weighted and have many of the same flaws as index funds.

The basket or collection is usually not based upon fundamental analysis, so often one gets the good with the not-so-good; not a valid reason to own them.

Factor Investing

A new approach to selecting the securities in any collection has emerged.  This is called factor investing and may be found in some of the so-called “smart beta” ETFs.  In these, capitalization is replaced by some other metric for selecting and weighting holdings such as cash flow or return on equity.  The metrics chosen are static and do not change with conditions. Also, the approach tends to be mechanistic and cannot consider many qualitative factors.

Although not perfect, fundamental analysis still offers the best opportunity to earn good returns, especially when the investing environment is in transition. That is what Riverplace Capital does.  Talk with Us! 

Some of our investors periodically ask us, “How are the money flows?” They know we keep track of this metric. The measurement is actually an indirect one and more accurately tracks buying or selling pressure on individual stocks. When a preponderance of stocks in a sector or in the market at large is reflecting buying pressure, we say money flows are positive for that category.

Tracking actual money flows into the market is virtually impossible. There are so many sources. Flows may come through dark pools, which are designed to keep sources and participants private. Companies may be buying back stock or have dividend purchase plans, among others. Some stocks trade on foreign exchanges as well as our domestic ones. There are many ways to disguise buying or at least not be so visible. Selling is harder to hide; when stocks go down there is selling.

What can’t be camouflaged is individual stock behavior. If a stock consistently closes at a higher price than its daily average, then it is showing buying pressure. When most stocks are showing the same, then money is coming in and pressuring for higher prices. Higher prices may occur immediately or have delayed reactions once individual supply at any price level is absorbed. We have stated that we are seeing positive money flows. What we are more precisely saying is that most stocks are showing positive buying pressure.

Riverplace Capital is not a trading investor, but we do like to know whether the near-term outlook is positive or negative.

We also like to know how individual stocks are being treated in the marketplace. It is another piece of information for our consideration. We then overlay our fundamental analysis along with a longer-term perspective. We invest for a 3 to 5-year investment horizon. If companies are still good investments, we may hold them for much longer.

In making a decision to hire an Investment Advisory Firm many ask what the most important factors are. The keys to an investment advisory firm are no different from any other business; management, management, management. Start with the management of the firm. Is it experienced, dedicated, and disciplined? Is there a team or is it a one-man band?

Look at the people. Are they vibrant, with reasonable tenure in the firm, or do you see constant turnover, poor attitudes, or other signs of poor or even bad management? Does the firm attract and retain talent? Look at the service. Is the firm responsive? Is the work accurate or fraught with error?

Can you count on the firm and not have to continually follow up? Human beings aren’t perfect, and no firm is perfect, but most of us know good service when we experience it. Is the management of your portfolio good? Do they deliver? Remember that none of us controls the investing environment. Delivering doesn’t necessarily mean beating every benchmark every quarter but measuring up well against them over time.

Just as important, are they consistent in their approach? Do you understand and agree with it? Many different approaches to investing can produce excellent results. The key is consistency and discipline. Managing a portfolio against your criteria is vital. It must be the risk level you are able and willing to accept.

If the management of your portfolio varies from your criteria, ask why. After all, it’s your money and your future. It all goes back to the management of the firm. None of these performance measures will stay strong over time if the firm is poorly managed.

COSTS

It is important to understand your costs. Are there other fees in addition to the posted management fee? There may be embedded fees in some of the investment vehicles that some firms use. Understand what these are and remember, you are paying these fees. Transaction 12b1 fees, etc. ought to be discussed with you. Annuities have several additional fees you should know about. You have a right to know about these charges and others. Riverplace Capital does its own research and management so we avoid this extra level of fees.

We believe Riverplace Capital measures up well against these criteria. We have a seasoned management team, a talented and experienced staff, and a high level of commitment to our clients.

How do we work together?  To start, it is important to understand that Riverplace Capital, headquartered in Jacksonville, FL, is an RIA or Registered Investment Advisor, with a fiduciary duty to each client. Together, with our team of financial advisors, asset management services are based on our firm’s philosophy of disciplined investing.

A client’s best interests drive the client’s Financial Plan in which each advisor strives to provide the best-in-class solutions combined with excellent investment performance. We provide:

A FREE Financial Consultation
We begin our relationship with a FREE one-hour financial consultation to:

• Get to know you
• Determine your personal financial goals
• Learn about other factors affecting your investment strategy
• Understand your risk tolerance and performance expectations
• Give an overview of our historical financial performance 

Create a Personalized Financial Plan

• Together, we create your Personalized Financial Plan
• Your Portfolio is created specifically to meet your needs
• Money is invested with discipline according to this plan
• We meet as needed to refine and update changing needs

Security

• Your money is set up in an account with a third-party custodian to protect your investments 
• We use Schwab predominantly
• We do not “take custody” of your assets – we only allocate” them for you

Access

• You have access to your money 24/7
• Access is online to your third-party custodian
• Access is private and password-protected access
• Access gives you the ability to withdraw funds

Communication

Once communication is set up, you receive:

• Monthly performance reports
• Our quarterly newsletter, Perspectives, with a performance statement
• Clients enjoy access to our weekly Lonely Bull blog and weekly stock market
• update videos
• We meet once a year for an annual review
• Changes can be made at any time throughout the year

If this high level of investing discipline appeals to you, call us.  We’re always available by phone or email to answer any questions.

Call us at (904) 346-3460 – we’re easy to talk to!

No, Riverplace Capital does not take full custody of your money. Riverplace Capital works with third party custodians such as Charles Schwab and Pershing, a division of/Bank of NY Mellon. An account is opened for you with one of these custodians and they take custody of your funds. This ensures appropriate checks and balances and protection for you as a client. Your money is always available to you 24-7 through access using your own individual login. Riverplace Capital does oversee management of your account, which allows us to trade on your behalf within your account.

Regardless of what life events come your way, the management of your assets can continue. Using sound investment strategy, Riverplace Capital will work with you to best prepare for the further benefit of your spouse, partner or heirs. Through our financial planning, we recommend to you how to best set up your account to best plan for contingencies.

Riverplace Capital does not make the business environment. Difficult periods have happened and will happen again. We make every attempt to protect the long-term value of your assets through our management and investing process. We usually take a longer-term approach, ensuring that you have quality holdings. In the meantime, through our planning process, we make sure you do not have to liquidate holdings at inopportune times.

At Riverplace Capital, based in Jacksonville, FL, we proudly welcome new clients throughout the year. Many of our clients have been with us for decades, and through their personal referrals, introduce family and friends.

If you are a client and satisfied with our work, we consider your continued trust in us the greatest compliment. Additionally, we welcome your referrals and introductions to those you care about so we can guide them toward their financial goals for the future.

Because money management is such a private and personal matter, we take your recommendations for other clients seriously. We treat prospective clients with the same exceptional care, confidentiality, personalized service, and professionalism that existing clients have come to appreciate.

If you would like to provide referrals on an ongoing basis, we can formalize a referral relationship with you. In this arrangement, we provide financial remuneration in the amount of 25% of fees charged for referrals as outlined by the Investment Advisers Act of 1940. There are, of course, some stipulations and a couple of documents to fill out. Let’s talk about this opportunity!

Riverplace Capital has a long history providing exemplary service and meeting clients investment goals. Many of our clients have been with us for decades and several have referred friends and family members (See “About Us”- Client Referral Program).

We work hard to build your trust through various methods of communication, including in-person meetings, a quarterly Perspectives Newsletter, our weekly Lonely Bull blog and regular live Face Book sessions on Thursdays. We’ve added a Learning Library to our website with resources and information to help guide your investing decisions.

We recognize that circumstances and relationships may change over the years. We are committed to performance, quality and service and ask you to let us know if we ever do not meet your expectations.

We also understand that investing requires a long-term approach to achieving your goals. This requires some discipline and patience at times. We are hear to discuss those circumstances and decisions as they occur. Please Talk With Us at any time to share your thoughts, concerns or questions.

If you are not satisfied with our service or performance for any reason, you have no obligation to continue with us. The management of your assets can be stopped at any time. Your account will be at a third party custodian and you can do anything with it you wish.

Riverplace Capital has a team of qualified investment professionals to manage your money. (See Our Team.) Should you decide you need a change for whatever reason, we have a number of accomplished portfolio managers you might be more in tune with and are happy to make adjustments to meet your personal style and investment needs. All portfolio managers work as a team in a collaborative environment. Whomever you are working with is bringing you the best-in-class service that Riverplace Capital can deliver.

The adage before the financial crisis of 2008, was to save $1,000,000 for retirement, invest that in treasuries or bonds that paid close to six percent interest, and live off the interest. For example, if you had saved $1,000,000 and were able to get a yield of six percent, it would provide an annual income of $60,000 while preserving the principal. However, that has all changed as we saw interest rates go to zero after the financial crisis. This has thrown a curve ball to those who were retired or have been contemplating retirement. People now must save more as we are living longer and options that are deemed “safe” don’t provide enough yield to provide adequate income. Because the yields are so low, retirees have been searching for other investment options. Bank offered certificates of deposit (CDs) that have been paying low yields for years, just recently crossing the two percent threshold. The US 10-year Treasury hit three percent for the first time last year, and has quickly retreated to two percent, still well short of the yield retirees need. Another deterrent with CDs offered at your local bank is that they often come with an early withdrawal penalty. This has left retirees searching for alternatives that provide the yields they need to preserve their nest egg as well as create the income they need.

Some have looked to insurance companies offering fixed annuity contracts that pay a little higher rate than CDs, still, their return is well short of what is required to live on. Also, these contracts are typically either five to seven-year contracts that often have huge surrender charges if you try to take your money out early. They also have complex, hard-to-understand contracts that you sign just to give them your money in exchange for a return. Other alternatives are income annuities that provide an immediate income stream. They typically require that you turn over a lump sum to the insurance company and they pay you a monthly income for your life. They may not return any of that principal to your heirs and may not continue to pay any spousal benefits. Annuities are also very costly to cancel, and their contracts can be very difficult to understand. These options can come at a very large cost to investors based on the returns they provide.

Corporate AAA-rated bonds, deemed riskier than Treasuries and CDs, have also been a vehicle used in the past to provide investors with a good return. The AAA rating provides the investor with confidence in the balance sheet of the company they are buying the bonds from. However, the corporate bond rates for ten-year bonds have failed to reach above a three percent return. They provide income either quarterly, semi-annually, or annually to investors. This can cause problems with budgeting and may cause issues with liquidity as these are ten-year investments. If interest rates rise over the next ten years, you may face challenges re-selling the bond to liquidate your position.

With all these low-yield investments that seem to have different levels of risk and principal reduction in fees, what are retirees to do? One strategy that has stood out from the crowd is investing in high dividend-paying stocks. Companies offer dividends to attract investors into buying shares of their company. When a dividend is announced, corporations declare a fixed dollar amount per share they will offer as a dividend. The dividend yield is then calculated by dividing the fixed dividend amount by the share price. For example, if ABC Corp pays a $4.50 dividend per share and the stock price is $100, the dividend yield is 4.5 percent. If the stock goes up to $110 or drops to $90, you still receive $4.50 per individual stock share that you own. One thing to keep in mind when putting together this strategy is to not just search for the highest-yielding stocks. They can often pay a high yield; however, they may have no growth or appreciation and may move downward in share price more than the market itself.

At Riverplace Capital, owned and founded by Peter Bower, we worked hard to research and identify stocks that are paying a good dividend and have growth or appreciation potential. We do our best to target stocks where the average yield will be around 4.5 percent, giving a much greater yield than you can get with traditional CDs, Treasuries, Annuities, or Bonds while being very liquid–meaning when you sell shares you don’t have early withdrawal penalties.

For example, referring to our initial example of a $1,000,000 portfolio, if you invested in a dividend portfolio that yielded 4.5%, that would provide an annual income of $45,000 regardless of appreciation or depreciation of the stocks themselves. This is a significant benefit for helping retirees not burn through the principal that is providing a stable income. This gives you the opportunity to take advantage of the appreciation of the stocks in your portfolio while also getting the returns from the dividends. Historically, the average return in the stock market is around 8 percent, while past performance is no indication of future returns, the upside appreciation opportunity is much larger than traditional fixed vehicles like CDs, Corporate AAA bonds, and annuities. Just like with any investment, there is risk involved, dividends are not guaranteed. That is why we believe it is important to work with a team that is actively monitoring and updating your dividend portfolio to help you navigate through your retirement. If you would like to learn more, contact us at (904) 346-3460 or [email protected]. Riverplace Capital, owned and founded by Peter Bower.

A self-directed IRA is no different than any other IRA, with the exception that a self-directed IRA simply allows you to direct a wider range of investments such as real estate, tax certificates and even notes. Traditional IRA custodians restrict you only to the investment products that they sell.

What can I invest in if I have a Self-Directed IRA?

The investments that you make outside of your IRA can now be made within it. You the investor have tremendous flexibility to make the investments of your dreams.  With a self-directed IRA, Riverplace Capital can show you how to invest your IRA in investments such as:

• Residential Real Estate
• Commercial Real Estate
• Raw Land
• Trust Deeds / Mortgages, and Mortgage Pools
• Private Notes and Loans
• Limited Liability Companies (LLCs)
• Tax Certificates
• And MANY other investments!

What types of retirement accounts can be moved into Self-Directed accounts?

• Traditional IRA’s
• Sep IRA’s
• Roth IRA’s
• 401(k)s
• 403(b)s
• Coverdell Education Savings (ESA)
• Qualified Annuities
• Profit Sharing Plans

Are Self-Directed IRA’s new?

No. There are two TRILLION dollars held in retirement accounts; however, only about 3% of retirement accounts are self-directed and only about 2% are invested in Real Estate. Self-directed IRA’s have been allowed since the creation of the IRA approximately 30 years ago.

Why haven’t I heard of Self-Directed IRA’s before?

The traditional investment community consists primarily of banks and stock brokerage companies. They “control” over 97% percent of retirement accounts.   As custodians, they only allow products that they sell to be held in IRA accounts held at their institutions.

Can I convert my IRA, Sep IRA, Roth IRA to a Self-Directed IRA and direct investments myself?

Yes. You can convert and self-direct all these types of accounts. In certain circumstances, you can also convert 401k and other employer plans as well.

Can I invest my Self-Directed IRA into Real Estate?

Absolutely. Real Estate is one of the most common non-traditional investments purchased inside of a self-directed IRA.  Within the broad category or Real Estate, there are many options for investment to name a few:

• Residential Rentals
• Commercial Properties
• Condominiums
• Mobile Homes
• Raw Land

Can my Self-Directed IRA purchase Real Estate I already own?

No. This would be considered a prohibited transaction (see IRC 4975). You many not purchase property which is currently owned by you or any other disqualified person (see below). You would need to find another piece of Real Estate that you don’t already own to purchase.

If I buy an income producing rental property in a Self-Directed IRA, what happens to the rent income?

The income MUST go back into the Self- Directed retirement account.  

My Self- Directed IRA is small. Can I personally co-invest with my IRA?

The answer is yes, however, you must be sure this is set up correctly through the creation of an LLC.

Can my Self-Directed IRA co-invest with friends?

Yes. Self-Directed IRA’s may purchase an undivided (and proportionate) interest in Real Estate.

May I use my Self-Directed IRA funds to make improvements or renovations?

Yes. In fact, you must use IRA funds to make the improvements and pay all expenses associated with the property. All expenses of the property are paid with IRA funds, and all income generated from the property must be deposited back into the IRA.

Can I buy vacation property using my Self-Directed IRA?

Yes. Doing so would not constitute a prohibited transaction. However, you cannot vacation there yourself. This would be considered self-dealing.

Can I buy my dream retirement home with my Self-Directed IRA and then live in it when I reach retirement age retirement?

Yes. Your IRA would be the original owner. You would use your IRA money to make the purchase and maintain the property. Any rents generated would be returned to the IRA. However, upon reaching retirement age, the property could be distributed out to you. Of course, you would have to pay taxes at that point, but without penalty if you are over the age of 59 1/2.

Can my Self-Directed IRA get a mortgage on a piece of property?

Yes. The mortgage would need to be a non-recourse type of loan, meaning that if your IRA fails to make the payments, the only recourse the lending institution has is the property itself. Also, be aware that if your IRA obtains a loan, unrelated debt financing income tax will apply.

Can my Self-Directed IRA make loans to other individuals who want to buy Real Estate?

Absolutely. And this is done frequently, and it is a great investment for your IRA because the loan can be secured by the property.

Can I make a loan to my brother or sister so that he can use the money as a down payment on a home?

Yes. According to IRC 4975, siblings are not included in the definition of disqualified persons. Thus, a loan to your brother or sister would not be a prohibited transaction.

Can my Self-Directed IRA make loans to a friend?

Absolutely. Friends are not disqualified persons under the Code, and therefore, your IRA can make a loan to them for any purpose whatsoever (boat, airplane, hot tub, home improvements, etc.). Of course, you want to make sure that there are proper formalities and reasonable terms to the loan.

Do taxes and penalties apply when I take money out of my self-directed IRA to buy Real Estate?

No. You DO NOT take money out to purchase Real Estate.  The IRA becomes the owner of the investment.  There are no taxes or penalties.

Are the gains taxable which are generated within my Self-Directed IRA?

Not in most cases. If an IRA buys a piece of property and then sells it at a profit, the gains stay within the IRA. If you have a traditional IRA, the gains are tax-deferred. If you have a Roth IRA, the gains are tax free. Note, you alter that result if you use leverage.

Are there any special taxes that apply when I use leverage?

Yes.  Unrelated business income tax would apply.

What are Prohibited Transactions within a Self-Directed IRA?

Understanding what constitutes a prohibited transaction is very important when it comes to making investments within your IRA. The IRS defines a prohibited transaction as follows:

 “Generally, a prohibited transaction is any improper use of your IRA account or annuity by you, your beneficiary or any disqualified person. Disqualified persons include your fiduciary and members of your family (spouse, ancestor, linear descendant, and any spouse of linear descendant).” IRS Publication 590

IRC 4975 is the section that lays out the rules on prohibited transactions. Prohibited transactions generally involve one of the following: (1) doing business with a disqualified person; (2) benefiting someone other than the IRA; (3) loaning money to a disqualified person; or (4) investing in a prohibited investment.

In plain English, prohibited transactions are those transactions that violate the basic intent of the IRA. Your IRA must benefit rather than benefiting you personally. In other words, there can be no “self-dealing” transactions. However, there are many ways in which you can invest your IRA and not be in violation of the prohibited transaction law. And when your IRA benefits, you benefit because it is for your retirement.

 What are Prohibited Investments within a Self-Directed IRA?

The Internal Revenue Code does not specifically authorize investments within an IRA; rather, the code outlines what types of investments are not allowed. The Prohibited Investments include but are not limited to:

• Artwork
• Rugs
• Antiques
• Metals

Who is a disqualified person regarding a Self-Directed IRA?

• The IRA holder and his or her spouse;
• The IRA holder’s ancestors of lineal descendants and their spouses;
• Investment Advisors
• Anyone providing services to the IRA such as a trustee or custodian.

 What would be classified as self-dealing within a Self-Directed IRA?

Self-dealing is using your IRA in transactions that in some way benefit you (or other disqualified persons) individually. The purpose of your IRA is to provide for your retirement. It is not intended to benefit you prior to retirement and distribution of the funds.

What are some types and examples of prohibited or self-dealing within a Self-Directed IRA?

• Self-dealing with a family member (having your IRA purchase a home from your father).
• Self-dealing with yourself (having your IRA purchase a home from yourself).
• Personal use of IRA property (buying a rental vacation home with IRA money and then staying in the home when on vacation).
• Receiving personal benefit from your IRA (paying yourself for work that you do on the property such as repairing the roof).

Can I buy a business with my Self-Directed IRA?

Yes, you can buy a business with your IRA.

Can I invest in an existing business through my Self-Directed IRA?

Yes. This can be done as the purchase of stock or as a loan to the business. You should no longer

Work for the employer. You can usually combine multiple retirement accounts into one.

Can I invest in gold through my Self-Directed IRA?

You can invest in gold!  As per the IRA statutes, some types of bullion and gold fall under the category of collectibles and according to the law you cannot hold any collectibles in your IRA. However, there is an exception that applies to certain highly refined bullion provided it is possessed by an IRS-authorized nonbank trustee or an approved bank. This rule is also applicable to indirect acquisitions like using the IRA-owned LLC to purchase the bullion. A reputable precious metals dealer will know the IRS rules.

Can my Self-Directed IRA deduct any losses on my income tax return?

No.  This is one of the disadvantages of investing within any retirement account.

If I am a Realtor, can I receive commission for the property that is bought or sold using the funds in my own Self-Directed IRA?

No. This would be considered a prohibited transaction and self-dealing.

A relatively new area for tax protection that has stimulated some interest and excitement amongst investors is something called Opportunity Zones.  If you have recently incurred capital gains and are interested in deferring, reducing or eliminating those gains, you may benefit from investing in an Opportunity Zone.

Opportunity Zones were created as a portion of the Tax Cuts and Jobs Act passed in December 2017.  The purpose of Opportunity Zones is to encourage investment in low-income areas to help increase employment, stimulate the local economy and create an overall improved quality of life.  Opportunity Zone investing from the new act creates three types of tax benefits for investors.  First, a deferral of capital gains until December 31, 2026; second, a potential for partial forgiveness of capital gain depending on when the investment into the Opportunity Zone investment is made; and lastly, if the investment is held for more than ten years there is no tax paid on future gains.  The initial perception was that Opportunity Zone investing was just about commercial real estate investing.  However, this is not the case at all!

So, what are Opportunity Zones and how do they work?  In March 2018, the Governor of each state and US Territory was responsible for nominating different areas of their state that fell within the bottom 20% of income relative to the national average.  The zones have already been selected, with over 8,700 census tracts nationally and 427 tracts in Florida alone. A map of Florida Opportunity Zones is included for your information. You can go online and view the zones in your area by visiting the Treasury Department’s website.  In Jacksonville two areas that you may be familiar with include St. Nicholas and Lakeshore as well as some locations in Mayport, Atlantic Beach, and Yulee.

Opportunity Zone investing is very limited in scope; only those individuals (including trusts and estates), corporations or partnerships that have recently incurred a large capital gain can benefit.  Before Opportunity Zones, the only way to defer paying Capital Gains taxes was to own a rental/investment property, sell it for a profit, and then roll the gains into similar property through a 1031 Exchange.  This is not the case for Opportunity Zone investing; any capital gain incurred can be deferred and real estate is not the only investment vehicle available through Opportunity Zone investing.

Investors who incur a gain, whether from the sale of a business, highly appreciated stock, or the sale of property, must invest their gains in Opportunity Funds within 180 days of realizing the gain to qualify for the tax incentives.  The Opportunity Fund is the centerpiece of Opportunity Zone investing because capital from the fund will be deployed into the investment vehicle within an Opportunity Zone.  The investor must create a Corporation (or an LLC filing as a Corporation) or a Partnership (General or Limited) that will hold the fund.  The investor self-certifies with the IRS that the funds under the Corporation or Partnership are indeed an Opportunity Fund. The investor then has 30 months to deploy the capitol into an investment within an opportunity zone.

An investor can buy shares of stock for a domestic company that operates primarily within an Opportunity Zone, purchase a business itself that operates primarily within an Opportunity Zone, or buy land/real estate within an Opportunity Zone.  If an investor buys land or property, they must substantially improve the property within 30 months.  For example, if you buy a warehouse for $1 million you would have to invest an additional $1 million in the property itself.  If you are buying land, you still have the same improvement requirements, however, by adding any type of building on the property you meet the improvement requirements.  If you buy a business or buy stock in a business operating within an Opportunity Zone, 70% of the tangible business assets must be located in an Opportunity Zone.  There are also some businesses, including establishments whose primary income comes from the sale of alcohol or alcoholic beverages, that do not qualify.  It is important to make sure you are investing in a qualifying business.

There are several tax benefits, and depending on when, and for how long you hold the investment, they may vary.  There are three potential tax incentives; deferral of initial capital gains tax, potential partial forgiveness of the original capital gain, and no capital gain tax on the appreciation upon sale.  For example, if an investor who incurred a capital gain in 2019, created an Opportunity Fund and invested the gain into that fund, they would see their capital gains forgiven 15% when they pay taxes for 2026.  If they invest in an Opportunity Fund by the end of 2021, they will see a reduction in their initial capital gain by 10% when they are due.  If that same investor holds onto their investment within the Opportunity Zone for ten years, they wouldn’t have to pay any capital gains if they sold the property/business for a profit.

Riverplace Capital has financial expertise in Opportunity Zones and can provide a consultation or presentation upon request. For more information contact us at (904)346-3460.

*Riverplace Capital is not a CPA or Tax Law firm; for specific tax advice consult your CPA or Tax Attorney.