A popular tax-saving strategy is investing traditional IRA dollars into a ground-up
real estate development fund, and then converting that investment into a Roth IRA.

Investors are constantly seeking innovative strategies to minimize their tax burden. One approach that is gaining
traction among financial advisors is the conversion of traditional IRA assets into Roth IRAs through ground-up
development limited liability companies (LLCs), due to the development funds having what is called a “J” Curve,
illustrated below. The graph below is to be used as example only, as the numbers do not reflect actual estimates.

1 . INITIAL INVESTMENT
An investor allocates $100,000 from their traditional IRA to an approved Capital Square development LLC investment.
2. J-CURVE FORMATION
Following the initial investment, Capital Square conducts an appraisal on the partially completed project. Due to construction
loan commitments and upfront costs, the appraised value dips to $50,000, representing the beginning of the J-curve.
3 . STRATEGIC TAX CONVERSION
Seizing this opportunity, the investor’s advisor facilitates a conversion of the traditional IRA into a Roth IRA, triggering a taxable
event. However, the taxes owed are approximately half the amount compared to the taxes owed on the initial investment.
4. TAX-FREE GROWTH
As construction progresses and the project stabilizes, the Roth IRA holding the investment experiences potential growth,
reaching the targeted return on investment and completing the upward swing of the J-curve.

This strategy may offer significant potential advantages by reducing the tax burden. Converting the traditional IRA to a Roth IRA at
the investment’s lowest valuation minimizes the upfront tax liability. This is because taxes are owed on the conversion amount, so
a lower valuation translates to a lower tax bill.