Prohibited IRA Transactions and Holdings

There are many choices when deciding how to invest your self-directed IRA. There are also rules that you need to be aware of before investing.  Violating the rules on transactions prohibited in your self-directed IRA can make your IRA account subject to risks and penalties. These transactions are prohibited because they are considered as providing immediate financial gain to you or other disqualified persons.

 A disqualified person includes the account holder, their spouse, descendants, investment advisors/managers and any corporation, partnership, trust, or estate in which the holder had a 50 percent or greater interest.

As a Self-Directed IRA holder, you may not:

  • Borrow money from or lend to the IRA
  • Sell, exchange or lease property to the IRA account or from the account to yourself
  • Use the IRA as a security for a loan
  • Transfer plan income or assets to disqualified persons
  • Lend account money to disqualified persons
  • Extend credit on their IRA to disqualified persons
  • Furnish goods, services, or facilities to disqualified persons
  • Allow fiduciaries to obtain or use the plan’s income or assets for their own interest

There are also prohibited holdings in a self-directed IRA. These include:

  • Collectibles
  • Metals other than gold, silver and palladium bullion
  • Gems
  • Stamps
  • Coins
  • Alcoholic beverages and other tangible personal property as defined by the Secretary of the Treasury

There is an exception to the coin holding. Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins and certain gold, silver, palladium, and platinum bullion.

In general, a self-directed IRA account is extremely flexible, however, it is important to stay within the guidelines as the penalties can be significant.  As one of the nation’s leading independent self-directed IRA and 401(k) administration companies, Mountain West IRA not only guides investors through the process of establishing a self-directed IRA account, but also ensures accounts are maintained to avoid prohibited transactions.