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Self-Directed IRA – Prohibited Transactions

Self-Directed IRA – Prohibited Transactions

With an IRA LLC with checkbook control, you can make investments of your choosing.  With a self-directed IRA,you can invest in what you want when you want to. However, before investing with a self-directed IRA, the rules must be clearly understood.

Most self-directed IRAs have in-house restrictions imposed by the self-directed IRA custodian. If you are “truly” self-directed with an IRA LLC, then the only limits are the ones that apply for IRAs in general.

Below is a list of restricted investments listed, under IRC Section 408 (which is the IRS code for IRAs) and prohibited transactions listed under Section 4975 (general prohibited transactions for various retirement accounts). These rules derive from the official version of the Internal Revenue Code (Title 26) made available to the public by Congress at:

http://uscode.house.gov/

Restricted Investments:

Life Insurance Contracts
Collectibles are defined as:

• Any work of art
• Any rug or antique
• Any metal or gem
• Any coin or stamp
• Any Alcoholic beverage

(Note: Exceptions for certain coins and bullion)

Prohibited Transactions:

Any direct or indirect…

Sale or exchange, or leasing, of any property between a plan and a disqualified person.

The lending of money or other extensions of credit between a plan and a disqualified person.

Furnishing of goods, services, or facilities between a plan and a disqualified person.

Transfer to, or use by, or for the benefit of, a disqualified person of the income or assets of a plan.

Act by a disqualified person who is a fiduciary whereby he deals with the income or assets of a plan in his/her own interests or for his/her own account; or

Receipt of any consideration for his/her own personal account by any disqualified person who is a fiduciary, from any party dealing with the plan in connection with a transaction, involving the income or assets of the plan

Disqualified People:

A disqualified person is the IRA Participant or anyone considered to be the IRA Participant. If you are deemed to be an IRA Participant, the people/entities listed below are disqualified people/entities:

  • You
  • Your ascendants and descendants (i.e., vertical bloodline, mother/father, daughter/son)
  • Your spouse or the spouse of your “descendants.”
  • Fiduciaries to your IRA (i.e., custodian or one who provides services to the IRA)
  • Companies owned or controlled 50% or more by the disqualified people listed above

(Note: Spouses of ascendants, i.e., stepmother/stepfather and siblings, are not disqualified)

 

Also See

What We Do

IRA LLC Case Law

U.S. Code Title 26 Section 408

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