Self-Directed IRA Rules

Not following the rules set forth for self directed IRAs and 401(k)s can bring into question the tax-deferred status of the account, potentially resulting in the disqualification of the IRA and severe tax consequences.

Official Documents regarding IRS Rules…

• Prohibited transactions under the provisions of ERISA - Types of investments and transactions that are not permitted for self directed IRAs.
• Section 4975 of the Internal Revenue Code - Internal revenue code referencing prohibited transactions with IRAs.
• Unrelated Business Income Tax (UBIT) - A tax occurs when leverage is used to purchase an investment in an IRA.

Explained in Plain English…

• Prohibited Investments - What investments your IRA cannot invest in under IRS guidelines.
• Self Dealing Rule - The #1Rule on self directed IRA investing that you must understand. Who you’re IRA cannot purchase investments from (hint: they’re people close you).
• Indirect Benefits Rule - Can I live in the vacation home my IRA owns? No.” Understand why your IRA, not you personally, needs to be receiving benefits of your investments
• Unrelated Business - When your IRA will have to pay on investments that use leverage or run a business