Since I can't transfer/gift shares directly to my Roth IRA, what's the most tax-efficient way for my Roth IRA to take ownership of as many units of my startup as possible?
Is this even possible? If not why?
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Since I can't transfer/gift shares directly to my Roth IRA, what's the most tax-efficient way for my Roth IRA to take ownership of as many units of XYZ LP as possible?
XYZ LP has some high fair market value so selling those shares directly to my Roth IRA seems incorrect.
Also - illegal.
I thought of incorporating an LLC ("MY-OWN LLC"), investing my Roth IRA in MY-OWN LLC, then gifting my partnership units to MY-OWN LLC, but the $300~ per-year costs of running an LLC is relatively hefty and I think I can only gift $13,000 in partnership units before getting taxed.
No, you cannot do that either.
That ^ there - that's the bottom line. Bottom line is that you cannot self-deal in a self-directed IRA (or any other retirement account). That is what is called a prohibited transaction. Any of the types of the transactions above will lead to your self directed IRA being disqualified, in its entirety, and the whole worth of that IRA will be considered distribution to you, taxed, and penalized.
You cannot transfer anything to your IRA that you own other than cash (or cash equivalent, i.e.: you can deposit a check, wire money from a bank account, etc). You cannot transfer any property, in any way, into your IRA.
I want to follow up that I understand the risk of crossing the line on the IRS's policy on prohibited transactions.
I've found that the best approach is simply to issue units of my startup, XYZ LP at some fair market value determined by my accounting firm, and have my IRA custodian purchase those units. Since the profit potential of a startup is extremely volatile and speculative, the units can be valued at a reasonably low unit price.