I Bonds through Entity Accounts - How Does it Work?

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Noobvestor
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I Bonds through Entity Accounts - How Does it Work?

Post by Noobvestor » Fri May 25, 2012 3:31 pm

http://www.treasurydirect.gov/indiv/hel ... re.htm#LLC

But what happens if/when the company dissolves? And perhaps less difficult (obvious answer seems obvious): how does taxation work if it is a pass-through LLC?
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Re: I Bonds through Entity Accounts - How Does it Work?

Post by FNK » Fri May 25, 2012 3:35 pm

If a company dissolves, I imagine it liquidates assets?

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Re: I Bonds through Entity Accounts - How Does it Work?

Post by Noobvestor » Fri May 25, 2012 4:57 pm

FNK wrote:If a company dissolves, I imagine it liquidates assets?
Realistically, it sounds like a recipe for abuse then - up your allocation by having a business?

Other than/short of that, presumably one could also have the company sell these down the line, then pay oneself out of that?

I'm not looking to skirt any laws here, just curious to see what would be legitimate.
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Re: I Bonds through Entity Accounts - How Does it Work?

Post by FNK » Fri May 25, 2012 5:02 pm

You can register as many trusts as you like, and as long as each gets a different tax id, you can have each trust get $10K/year. Will it be worth it, though?

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Re: I Bonds through Entity Accounts - How Does it Work?

Post by Noobvestor » Fri May 25, 2012 5:32 pm

FNK wrote:You can register as many trusts as you like, and as long as each gets a different tax id, you can have each trust get $10K/year. Will it be worth it, though?
Worth what? (Do you mean time, money, or risk that it's not legitimate?) ... I think it's something like 100 bucks to register an LLC in my state and I *believe* (going from memory here) that's a one-time fee. Effectively, a one-time, one-percent load, cost-wise, no (and that only on your first 10K I Bond purchase - no load on subsequent ones)?
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Re: I Bonds through Entity Accounts - How Does it Work?

Post by Noobvestor » Fri May 25, 2012 5:46 pm

jenny345 wrote:
Noobvestor wrote:
FNK wrote:You can register as many trusts as you like, and as long as each gets a different tax id, you can have each trust get $10K/year. Will it be worth it, though?
Worth what? (Do you mean time, money, or risk that it's not legitimate?) ... I think it's something like 100 bucks to register an LLC in my state and I *believe* (going from memory here) that's a one-time fee. Effectively, a one-time, one-percent load, cost-wise, no (and that only on your first 10K I Bond purchase - no load on subsequent ones)?
When I checked into this years ago in my state I am pretty sure to have an LLC the business had to be something other than just buying passive investments like stocks and bonds. Maybe you could have a lawn mowing business that also bought an I bond, but I would check into what activities are allowed by your state and fall within their guidelines. BTW, my retirement plan for my business also has its own EIN.
In my case I actually do own a few LLCs (they are pass-throughs for tax purposes, but do have EINs) for real-business purposes, but good to know: sounds like (and I'm not surprised) it would be sketchy at best to form an LLC just for buying I Bonds.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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Re: I Bonds through Entity Accounts - How Does it Work?

Post by zotty » Fri May 25, 2012 7:53 pm

I just did a trial run on TD to sign up my LLC. I'm missing some documentation (IRS Name Control for IEN (?)!), but it doesn't appear disregarded entities (pass through taxes) are disqualified.

Interesting and cool.

Edit: Signed up the LLC and made a contribution. I assume the business will receive a 1099 INT when I sell, just like a business savings account.
Last edited by zotty on Fri May 25, 2012 8:20 pm, edited 1 time in total.
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Re: I Bonds through Entity Accounts - How Does it Work?

Post by zotty » Fri May 25, 2012 8:00 pm

For posterity. If anyone needs "IRS Name Control" for their business:

http://www.irs.gov/businesses/corporati ... 77,00.html

First 4 characters of the company name with special rules for invalid characters.

I think i'll go ahead and sign up the LLC right now.
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Re: I Bonds through Entity Accounts - How Does it Work?

Post by sscritic » Fri May 25, 2012 8:29 pm

I am not sure what the great discovery here is. Your revocable living trust is an entity; your revocable living trust is a pass-through for taxes. Your revocable living trust can buy I Bonds. Did you think a pass-through LLC was somehow different than a pass-through living trust at TD?

It's on the same page at the TD website:
http://www.treasurydirect.gov/indiv/hel ... .htm#Trust

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Re: I Bonds through Entity Accounts - How Does it Work?

Post by sscritic » Fri May 25, 2012 10:00 pm

jenny345 wrote: Hey, sscritic it is news to me. :) I just never thought of it before. There's another entity for I bonds for me. Thanks for the link!
With all the threads on the limits on I bond purchases, there were lots of posts on how to buy $40,000 a year as a couple: you, your spouse, your living trust using your SSN, and your spouse's living trust using the other SSN. Now most couples don't have two trusts, but plenty have one, allowing them to buy $30,000 a year. I just thought that if someone was interested in buying I bonds, they would have known that your living trust using your SSN has a separate limit from your own limit. I guess the living trust as separate entity for I bond purchases wasn't as well known as I thought.

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Re: I Bonds through Entity Accounts - How Does it Work?

Post by Noobvestor » Sat May 26, 2012 12:53 pm

News to me too - thanks for pointing it out! I didn't spot it in the Wiki, for instance, but maybe I missed it somehow (or assumed a living trust was too tricky to set up - initial Googling says setup can range from 500 to 3000 bucks, vs 100 bucks for an LLC). Got any good links to get me started? Found a bit here, but not much: http://www.bogleheads.org/wiki/Asset_protection

As for me ... I'm not married, so that's one limiting factor, and I really could use, er, let's say 'more than a lot' of tax-deferred space right now :/
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Re: I Bonds through Entity Accounts - How Does it Work?

Post by Tony » Wed Jan 02, 2013 10:58 am

sscritic wrote:
With all the threads on the limits on I bond purchases, there were lots of posts on how to buy $40,000 a year as a couple: you, your spouse, your living trust using your SSN, and your spouse's living trust using the other SSN. Now most couples don't have two trusts, but plenty have one, allowing them to buy $30,000 a year. I just thought that if someone was interested in buying I bonds, they would have known that your living trust using your SSN has a separate limit from your own limit. I guess the living trust as separate entity for I bond purchases wasn't as well known as I thought.
A few days ago, I tried to purchase $10k in our recently formed living trust. Treasury Direct has responded that it's not allowed.
My SS # is used for the trust. My spouse and I had previously purchased $10k in each of our SS #s in 2012.

Here's our exchange:

TD:
Your purchase exceeds the annual savings bond purchase limitation. Please be
advised the limit is $10,000 per series and TIN per calendar year. Repeated
violations mayresult in an action by this office; for example, a refund of
account holdings and/or account closure may occur.
Thank you for using TreasuryDirect.


Me: Hello, It is my understanding that 10,000 in I Bonds can be purchased with the registration of a trust as well as $10,000 per Social Security number in individual accounts. Isn't this true? Thank you for writing.

TD:Hello,
The limitation is per Social Security Number. Not by registraiton.
Customer Service Specialist


What do you think? BTW, the $10k was taken out of our account and has not been put back in. I'll check now to see it the purchase still shows up in our trust account at TD.
Tony

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