At least this way I'll decide if I comply.

In regards to the 'aggressive' Roth conversion, most tax attorneys would consider this statement a compliment. There is a long history of taxpayer vs. IRS litigation on valuing interests in private companies. That's what makes it extremely important to work with expert tax attorneys to make sure the set-up and valuation are done properly. This method has been used in estate planning for years, and there's no reason to not do tax planning for the rest of your wealth and not your IRA.

“A now well established and conventional estate-planning strategy is to put assets into an LLC having features that suppress the fair market value of ownership shares in the LLC. Such features often include restrictions on transferring shares, restrictions on distributions and a requirement for a supermajority, or even unanimity, to dissolve the LLC. Achieving a discount of 35 percent (the value of the shares vs. the value of the assets inside the LLC) is common, which reduces the related gift or estate tax by 35 percent.”

Coxon concludes that you can apply that strategy to a Roth conversion, “since it is the fair market value of the assets being transferred to the Roth — the shares in the LLC — that gets taxed. The result can be a big cut in the tax cost of making the conversion.”

Is it a scam?
I asked Certified Financial Planner Michael Kitces, director of research at Pinnacle Advisory Group in Columbia, Md., if this was a scam. He says no. But the strategy Coxon describes, while possible, is “very aggressive,” Kitces told me via e-mail.

“The IRS has been fighting many of these types of valuation discounts VERY hard in the estate tax world, and would likely fight them here as well,” Kitces says. The upshot: The discount may be disqualified by the IRS, or you just may end up losing money defending your position.

Kitces says the discounting strategy is iffy when the LLC is owned by 1) the IRA and 2) the IRA owner. In his words:

“The discounting for the LLC occurs typically through multiple owners. So you create an LLC. Your IRA owns 49 percent of it. You personally own 51 percent of the LLC. Now your IRA owns a minority share. You can also put restrictions on the salability of the LLC and the transferability of the LLC. The combination of minority non-controlling interest, with restrictions on salability and transferability, reduces its value. … 'Ideally,' an unrelated third party would own the majority controlling share; of course, most people don't like that in the real world, because then they REALLY CAN'T CONTROL how the LLC is invested. The reflection of those fears — when they're really applicable — is WHY there are such minority discounts. The unfortunate reality is that many taxpayers try to have their cake and eat it too — get the discount for minority and lack of control, but not 'really' give up control — and that's where the problems tend to arise.”

http://www.bankrate.com/financing/retirement/th…

“A now well established and conventional estate-planning strategy is to put assets into an LLC having features that suppress the fair market value of ownership shares in the LLC. Such features often include restrictions on transferring shares, restrictions on distributions and a requirement for a supermajority, or even unanimity, to dissolve the LLC. Achieving a discount of 35 percent (the value of the shares vs. the value of the assets inside the LLC) is common, which reduces the related gift or estate tax by 35 percent.”

Coxon concludes that you can apply that strategy to a Roth conversion, “since it is the fair market value of the assets being transferred to the Roth — the shares in the LLC — that gets taxed. The result can be a big cut in the tax cost of making the conversion.”

Is it a scam?
I asked Certified Financial Planner Michael Kitces, director of research at Pinnacle Advisory Group in Columbia, Md., if this was a scam. He says no. But the strategy Coxon describes, while possible, is “very aggressive,” Kitces told me via e-mail.

“The IRS has been fighting many of these types of valuation discounts VERY hard in the estate tax world, and would likely fight them here as well,” Kitces says. The upshot: The discount may be disqualified by the IRS, or you just may end up losing money defending your position.

Kitces says the discounting strategy is iffy when the LLC is owned by 1) the IRA and 2) the IRA owner. In his words:

“The discounting for the LLC occurs typically through multiple owners. So you create an LLC. Your IRA owns 49 percent of it. You personally own 51 percent of the LLC. Now your IRA owns a minority share. You can also put restrictions on the salability of the LLC and the transferability of the LLC. The combination of minority non-controlling interest, with restrictions on salability and transferability, reduces its value. … ‘Ideally,’ an unrelated third party would own the majority controlling share; of course, most people don’t like that in the real world, because then they REALLY CAN’T CONTROL how the LLC is invested. The reflection of those fears — when they’re really applicable — is WHY there are such minority discounts. The unfortunate reality is that many taxpayers try to have their cake and eat it too — get the discount for minority and lack of control, but not ‘really’ give up control — and that’s where the problems tend to arise.”

Here’s what I get out of it: The open opportunity IRA sounds like an open invitation to get into trouble with the IRS.”

http://www.bankrate.com/financing/retirement/the-open-opportunity-ira/