Self-Directed IRA LLC Prohibited Transactions: What You Need to Know

Self-Directed IRA LLC Prohibited Transactions

Self-Directed IRA LLC Prohibited Transactions

When it comes to planning for retirement, it is important to know how to properly utilize their IRA retirement funds, as well as knowing what the different Self-Directed IRA LLC Prohibited Transactions are. This is not just because you have to avoid illegal transactions but for you to also make sure that you will not end up losing the money that you have spent years saving. There are several factors that one should consider in order to fully understand what transactions you should get into and the ones that you should stay away from.

Who is Considered a Disqualified Person?

When it comes to acquiring investments through self-directed IRA with checkbook control, there are several types of individual or groups of individuals that you are not allowed or authorized to transact with. Based on the Internal Revenue Code, a disqualified person may be one of the following examples:

  • A fiduciary which includes the account holder or anyone who has the authority to conduct transactions with the use of the self directed IRA account.
  • Those who provide IRA services such as the provider or the chosen custodian.
  • Any family member such as their children, spouse, grandparents, great-grandparents, grandchildren and their spouses.
  • Any entity such as a corporation, trust, partnership or estate that owns about 50 percent of LLC or IRA.

It is also important to take note that the law does not consider one’s siblings, step-siblings, uncles, aunts, and friends as part of the disqualified person list. Given this list, any purchases, sales and acquisitions done through these people or entities will be deemed as self-directed IRA LLC prohibited transactions.

Self-Dealing as a Prohibited Transaction

Any transaction that is self-dealing or self-beneficial can be considered as a prohibited transaction. Even transactions were done to benefit any of the disqualified persons on the list are also not allowed. One example would be using your checkbook control to purchase a home or property for the purpose of living in or for personal gain. Even personal loans to yourself or any disqualified person are prohibited as well.

Prohibited Assets Under the Self-Directed IRA LLC Prohibited Transactions

When it comes to asset acquisition, there are types which your IRA self-directed account does not allow. IRA prohibits the purchase of life insurance policies, Sub Chapter S corporation Stocks and other investments such as Art, antiques, stamps, and other items that the U.S. Treasury considers as collectibles.

Penalties will surely apply in case one does not observe the set Self-Directed IRA LLC Prohibited Transaction rules. Be sure to consult with experts before pushing through with your investment plans.

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