How to get property out of a self-directed IRA?

Getting real property out of a self-directed IRA is more complex than taking a cash withdrawal, and the tax consequences depend significantly on your IRA type
and your age.

The most tax-efficient approach for traditional IRA holders: sell the property inside the IRA, let the proceeds sit as cash in the account, and take cash
distributions over time. Spreading distributions across multiple years keeps you in a lower tax bracket each year rather than recognizing the full property value
in a single year.

The alternative an in-kind distribution means transferring the property itself from the custodian’s name into your personal name. The IRS treats the full fair
market value of the property at the time of transfer as a taxable distribution in that year. For a $350,000 property, that’s $350,000 of ordinary income recognized
in one tax year. Depending on your bracket, that could mean a $70,000 to $100,000 tax bill from a single transaction.

In a Roth IRA, the calculus is different. If you’re over 59.5 and the account has been open at least 5 years, an in-kind distribution of property from a Roth
IRA is completely tax-free. A $350,000 property comes out with no federal income tax owed. That’s a significant advantage for investors who’ve been building real
estate inside a Roth structure over many years.

Required minimum distributions create an additional challenge for traditional IRA holders who own real estate. Starting at age 73, you must take minimum
distributions annually. If the account holds primarily illiquid property, you need either cash inside the IRA for RMDs or a plan to sell the property before
that obligation kicks in. Planning the exit strategy when you set up the IRA real estate investment not in your early 70s is the right approach.

A real estate IRA custodian and a CPA who understands SDIRA distributions are both necessary for navigating this correctly.