Term:
Administrator
Definition:
An IRA Administrator normally provides an IRA owner with education and consulting services about their IRA investments. In some cases they can hold IRA funds on deposit, but normally this is left up to a Custodian or Trustee. An IRA Administrator can maintain IRA paperwork and provide IRA statements.
Term:
C-Corporation
Definition:
(or “C Corp.”) refers to the way a corporation is organized. C Corp status defines how the corporation will be taxed. A corporation is called a C corporation if it is taxed under Subchapter C of the Internal Revenue Code of 1986. The C Corp has the benefit of no liability for partners or shareholders.
Term:
Collateral
Definition:
Property used as security for the repayment of a loan.
Term:
Common Sense
Definition:
Ordinary good sense and judgment.
Term:
CRP Income
Definition:
Conservation Reserve Program. CRP offers annual payments for 10-15 year contracts to participants who establish grass, shrub and tree cover on environmentally sensitive lands.
Term:
Custodian
Definition:
A company who is either approved and regulated directly by the IRS, or affiliated with or owned by a bank or trust company and subject to regulation from their state Banking Commissioner and/or the Comptroller of Currency and FDIC. Custodians handle the formation and maintenance paperwork for a self-directed retirement account as well as handle the money for that account.
Term:
Default
Definition:
Failure to do something required by duty or law.
Term:
Discounted Note
Definition:
A Note that has been purchased for less than the face value of the Note Balance.
Term:
Facilitator
Definition:
A facilitator is normally a company that provides advice and consulting to IRA Account Holders. Facilitators are not custodians or trustees and will not normally hold assets or process IRA transactions.
Term:
Investment
Definition:
The outlay of money for income or profit.
Term:
Lineal
Definition:
Belonging to or being in the direct line of descent from an ancestor. In a straight unbroken line of descent from parent to child.
Term:
LLC
Definition:
Limited Liability Company. A legal form of business company offering limited liability to its owners. It is similar to a corporation, and is often a more flexible form of ownership; especially suitable for smaller companies with a limited number of owners.
Term:
Multi-Family Dwelling
Definition:
A multi-unit dwelling made up of several apartments or dwellings to be used by several families.
Term:
Non-Recourse Loan
Definition:
A Non-Recourse Loan is a loan secured entirely by the collateral. Upon default, there is no recourse to collect the loan from the IRA Owner personally or the IRA itself.
Term:
Prohibited Transactions
Definition:
Prohibited transactions, as defined in IRS Publication 560 are transactions between the plan (IRA) and a disqualified person that are prohibited by law. Ex. A transfer of plan (IRA) income or assets to, or use of them by or for the benefit of, a disqualified person. Ex. Any act of a fiduciary by which he or she deals with plan (IRA) income or assets in his or her own interest.
Term:
Real Estate
Definition:
Property in buildings and land.
Term:
Real Estate Appraisal
Definition:
The practice of developing an opinion of the value of real property, usually its Market Value.
Term:
Rental Income
Definition:
Money or the amount of money paid or due at
intervals for the use of another's property. An amount paid or collected as rent.
Term:
S-Corporation
Definition:
Subchapter S Corporation. The choice by a small corporation to be treated under “Subchapter S” by the Internal Revenue Service, which allows the corporation to be treated like a partnership for taxation purposes. This may provide the benefit of passing losses to the stockholders.
Term:
Self-Directed IRA
Definition:
A Self-Directed IRA is an IRA that has a Custodian who allows the IRA Holder to invest in a wide range of assets.
Term:
SEP IRA
Definition:
Simplified Employee Pension Individual Retirement Account. A variation of the Individual Retirement Account. A provision that allows an employer to make retirement plan contributions into a Traditional IRA established in the employee’s name, instead of to a pension fund account in the company’s name.
Term:
Single-Family Dwelling
Definition:
A free standing residential building that traditionally houses one family.
Term:
Traditional IRA
Definition:
Traditional Individual Retirement Account. A retirement plan account that provides some tax advantages for retirement savings. Contributions are often tax-deductible. All transactions and earnings with the IRA have no tax impact, and withdrawals at retirement are taxed as income.
Term:
Well-Seasoned Note
Definition:
A Promissory Note that has a payment history of at least two (2) years or more showing consistent payments as agreed.
Term:
Debt Service Coverage Ratio
Definition:
Known as DSCR, this is the ratio of total annual rent or lease income divided by the total expenses including loan principal and interest payments, taxes, insurance, vacancy, management, association dues, and maintenance expenses for an investment property for one year.
Term:
Reserve Requirement
Definition:
This is the amount of excess liquid cash or investments in an IRA expressed as a percentage of the loan amount of a non-recourse loan. 10% is the minimum. A $100,000 non-recourse loan would require $10,000 in reserves.
Term:
IRA Loans
Definition:
The IRS code specifies that when an IRA borrows money, it must be a non recourse loan. See Non-Recourse Loan.