Self-directed IRA owning a Belize company for foreign investments - what are the reporting requirements?

This is a complex area with some serious reporting requirements you don't want to miss. Self-directed IRAs with foreign entities create multiple layers of potential reporting obligations. First, understand that while your IRA is technically the owner of the Belize company, you as the beneficial owner of the IRA may still have reporting obligations. For FBAR purposes (FinCEN Form 114), if your foreign financial accounts exceed $10,000 at any point during the year, you likely need to file - even if through an IRA. The $187,000 you mentioned definitely triggers this threshold. For Form 5471 (Information Return of U.S. Persons With Respect to Certain Foreign Corporations), the rules get trickier. Since your IRA owns 100% of the foreign corporation, there may be Category 5 filer requirements. However, some tax professionals argue that IRAs as tax-exempt entities create an exception. You also need to consider Form 8938 (FATCA reporting) requirements, which have different thresholds depending on whether you live in the US or abroad.

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One major issue nobody's mentioning with self-directed IRAs and foreign entities - prohibited transactions! If you're directing the investments of the Belize company or receiving any personal benefit outside the IRA, you could be triggering a prohibited transaction that disqualifies your entire IRA. I had a client who did something similar, and the IRS deemed his actions as "self-dealing" because he was essentially controlling the day-to-day investment decisions of the foreign entity. The entire IRA was disqualified and treated as distributed on January 1 of the year the prohibited transaction occurred. Tax bill was over $68,000 including penalties. Make sure you have proper management structures in place and aren't personally directing the investments of the Belize entity.

Has anyone used one of those specialized IRA custodians for international holdings? My regular custodian freaked out when I mentioned foreign investments and suggested I transfer to a company that specializes in this area.

Just went through this exact scenario last year with my self-directed IRA that owned a Belize LLC. The reporting requirements are definitely complex, but here's what I learned: You'll likely need to file FBAR (FinCEN Form 114) since the foreign accounts exceed $10,000. Even though your IRA technically owns the entity, you're still considered the beneficial owner for reporting purposes. For Form 5471, it depends on how your Belize LLC is classified for US tax purposes. If it's treated as a corporation (which is the default for foreign LLCs), you'll probably need to file as a Category 5 filer since your IRA owns 100% of the entity. One thing that saved me a lot of headaches was getting proper documentation from day one. Make sure your IRA custodian has all the Belize entity formation documents and maintains clear records showing the IRA as the owner, not you personally. This becomes crucial if the IRS ever questions the structure. Also, don't forget about potential state reporting requirements depending on where you live. Some states have their own international disclosure rules that mirror the federal requirements. The key is getting professional help early - these international structures can trigger serious penalties if not handled correctly. A specialized international tax attorney or CPA who understands self-directed IRAs is worth every penny to avoid compliance issues.