Indirect Benefits Rules


The purpose of the IRA is to provide for your retirement in the future. It is considered an “indirect benefit” if your IRA is engaged in transactions that, in some way, can benefit you personally today.


The IRS defines a prohibited transaction as follows:
 
"Generally a prohibited transaction is any improper use of your IRA account or annuity by you, your beneficiary or any disqualified person. Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendant, and any spouse of lineal descendant)." --Source: IRS Publication 590
 
IRS Publication 590 indicates that, in addition to prohibited investments, the IRS prohibits certain transactions within IRAs. Prohibited transactions include investments with disqualified individuals (as defined by IRC 4975), “self-dealing” and receiving indirect benefits.

Indirect Benefit Examples
 
The following are just a few types of indirect benefit transactions that are NOT allowed in an IRA:
  • Personally using property held in the IRA: Using real estate purchased through your IRA— as an office, personal residence, vacation home or retirement home.
  • Receiving personal benefits from your IRA: Lending yourself money from your IRA or paying yourself, or a company that you own, to do work on a home purchased by your IRA
  • Using your IRA funds to buy a vacation home that you or your family will use.


Please Note: This information is presented for educational purposes only and should not be construed as tax, legal, or investment advice. Whenever making an investment decision, please consult with legal, tax, and accounting professionals.