Tax Law and News Prohibited Transactions of Self-Directed IRAs Read the Article Open Share Drawer Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on LinkedIn (Opens in new window) Written by Steve Eubanks, EA, NTPI Fellow Modified Oct 19, 2017 2 min read Self-directed IRAs have reached popularity in recent years, allowing for flexibility and choice of investments. Accountants need to advise their clients on how a misstep of the rules can cause an IRA nightmare. The IRS has strict rules on prohibited transactions (IRC 4795). Keep in mind that IRAs are a completely separate entity, and not following these prohibited transactions rules can result in losing the IRA status. Prohibited Transactions Sale, exchange or leasing of any property between a plan and a disqualified person Lending of money or other extension of credit between a plan and a disqualified person Furnishing of goods, services or facilities between a plan and a disqualified person Transfer to, use by or for the benefit of a disqualified person of the income or assets of a plan Act by a disqualified person, who is a fiduciary that deals with the income or assets of a plan in his/her own interests, or for his/her own account Receipt of any consideration for his/her own personal account by any disqualified person who is a fiduciary from any party dealing with the plan in connection, with a transaction involving the income or assets of the plan Disqualified Persons A disqualified person is defined as the account holder and spouse, lineal descendants (children, grandchildren, parents, grandparents, etc.), fiduciaries, trustees, investment managers and advisers, as well as any corporate entity in which the account holder has at least a 50 percent ownership. An example of a prohibited transaction is when the IRA purchases a rental home and your spouse is the real estate agent who receives a commission for the sale. Another example of a prohibited transaction is having your grandson mow the lawn of the rental home for compensation. Prohibited Investments The following are investments or assets that the IRA is not allowed to own. For a complete list, see IRS Publication 590. Work of art Stamps Coins (exception U.S. Minted Gold or Silver Eagle) Alcoholic beverages (wine, scotch) Antiques Rugs Insurance contracts S-corporation stock Previous Post IRS Urges Public to Stay Alert for Scam Phone Calls Next Post November 2015 Tax and Compliance Deadlines Written by Steve Eubanks, EA, NTPI Fellow Steve Eubanks, EA, NTPI Fellow, is a Senior Tax Analyst Programmer with Intuit® for more than 33 years. Steve has been an Enrolled Agent since 1987 and has a Master of Business Administration in finance. He has extensive experience with individual, corporate, and non-profit tax compliance. He is an active member of the National Association of Enrolled Agents and the Texas Society of Enrolled Agents. More from Steve Eubanks, EA, NTPI Fellow Comments are closed. Browse Related Articles Tax Law and News October 2024 tax and compliance deadlines Tax Law and News Safeguards Rule and cybersecurity leadership Practice Management Al innovations: Transforming your firm for the future Advisory Services Generational wealth: Family trusts and tax planning Tax Law and News Help your clients avoid tax-time surprises Tax Law and News Guide to energy and clean vehicle tax credits Practice Management Cloud automation drives results for Three Peaks Tax Law and News Tax relief for victims of Hurricane Francine Advisory Services La función de un contador en la planificación de la s… Advisory Services Preparing your clients’ children for inheritance