Prohibited Transactions
Self-directed individual retirement accounts provide a great deal of freedom, flexibility, and choice of potential investments. However, they are also governed by a set of rules that self-directed investors must be aware of and follow.
Some types of self-directed transactions violate the basic intent of your individual retirement account, and may subject your account to risks and penalties.
Your retirement plan is intended to benefit you when you retire and not before. Transactions that can be interpreted as providing immediate financial gain to the account holder or other disqualified persons are not allowed.
For example, an IRA holder may not:
- Borrow money from or lend to the individual retirement account
- Sell, exchange or lease property to their IRA or from their IRA to themselves
- Use the IRA as security for a loan
- Transfer plan income or assets to disqualified persons
- Lend IRA 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
Prohibited Holdings in a Self-Directed IRA
In addition, you may NOT purchase any of the following in a self-directed IRA:
- Collectibles (including works of art, rugs, antiques)
- Metals other than gold, silver and palladium bullion
- Gems
- Stamps
- Coins* (see below)
- Alcoholic beverages and other tangible personal property as defined by the Secretary of the Treasury
However, your individual retirement account may invest in one, one-half, one-quarter, or one-tenth ounce U.S. gold coins, or one-ounce silver coins minted by the Treasury Department. It can also invest in certain other platinum coins and certain gold, silver, palladium, and platinum bullion.
Please refer to IRS publication 590 for more information.
Disqualified Persons or Entities within an IRA
For Traditional IRAs, ROTH IRAs, SEP, Simple Plans or 401(k), a disqualified person is:
- The IRA holder and his or her spouse
- The IRA holder’s lineal descendants, ascendants and their spouses
- Investment advisors and managers
- Any corporation, partnership, trust, or estate in which the IRA holder has a 50 percent or greater interest
Anyone providing services to the IRA, such as the trustee or custodian (See IRS Section 4975 for a complete list of prohibited parties’ credentials).
Click below to view our helpful Disqualified Persons chart.
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