IRA Prohibited Transactions

What are the prohibited transactions?

IRA Prohibited Transactions

The IRA LLC And Adhering To The IRA Rules:

The IRA LLC with checkbook control gives you ultimate investment freedom without the traditional limitations and onerous fees levied by your IRA custodian.

With a New Standard IRA (IRA LLC), you can invest how and when you want. However, some restrictions do apply, which are outlined in the IRS code.

The IRS restricts what assets you can invest in, who can you invest and do business with and under what circumstances you may do so.

For education purposes, we will list the IRA rules below. Note: IRA rules are subject to change, so as a fail-safe, always refer to the IRS website or a competent tax professional familiar with IRAs before you make an investment.

Investor Be Aware!

IRA Custodian Restrictions vs. IRS Restrictions

Your IRA custodian may impose investment restrictions that go beyond the IRS rules.

Note: By law, self-directed IRA custodians can impose even greater restrictions on what you can’t invest in with your IRA than the IRS, which is why the topic of IRA-prohibited transactions often gets muddied.

The additional asset restrictions combined with the excessive custodial fees are often the primary reasons why investors choose to form an IRA LLC. Perhaps, you are considering an IRA LLC for yourself for the same reasons.

For example, an IRA custodian may prohibit you from investing in cryptocurrency, even though cryptocurrency is not explicitly listed as a restrictive asset under the IRS rules on IRAs.

With an IRA LLC, you are truly self-directed; the only restrictions placed on an IRA LLC are those that apply to IRAs generally, which are outlined below.

If you have questions about selecting the right IRA custodian or want assistance setting up your IRA LLC the right way, the first time, without the hassle of figuring it out on your own, don’t hesitate to contact us.

Would You Like To Set Up An IRA LLC?

Download our in-house IRA LLC checklist for free to create IRA LLCs for our clients. You will also receive a sample IRA LLC operating agreement to review.

know the rules!

Restricted IRA investments:

Before Investing in a self-directed IRA, you must know some basic IRA Rules.

Below is a short list of restricted assets, which are defined in IRC Section 408 (code for IRAs) and prohibited transactions defined in IRC Section 4975 (code for prohibited IRA transactions).

Note: The IRS does not tell what you can invest in, but rather what you cannot invest in with your IRA. Therefore, if the IRS does not explicitly prohibit you from purchasing a particular asset, you are safe to assume that you are free to do so.

To comply with these IRA rules, refer to the official versions of the Internal Revenue Code (Title 26) published on www.uscode.house.gov by Congress.

Restricted IRA investments include:

Any work of art
Rug or antique
Any gems or gemstones
Any alcoholic beverage, such as a fine wine.
Any coin or stamp: However, there are certain exceptions for coins and bullion.
Precious Metals, except for most bullion-grade gold, silver, palladium, and platinum coins and bars.

Prohibited IRA Transactions Include:

Any direct or indirect...

Life Insurance 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, or 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 whereby he deals with the income or assets of a plan in his own interests or for his own account or
Receipt of any consideration for his 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.

IRA Disqualified Parties:

A disqualified person is an IRA Participant or anyone considered an IRA Participant.

If you are an IRA Participant, the people or entities listed below are disqualified:

Your ascendants and descendants (i.e., vertical bloodline, mother/father, daughter/son).
Your spouse or the spouse of your “descendants.” (i.e., son-in-law/daughter-in-law).
Fiduciaries to your IRA (i.e., custodians or someone who provides services to the IRA).
Companies owned or controlled by 50% or more of the disqualified people listed above.

(Note: Spouses of ascendants, for example, your stepmother, stepfather, and your siblings, are not considered disqualified parties!)

Allowed IRA Investments:

Aside from the short list of restrictions outlined above, here’s a list of assets you may invest in with your self directed IRA LLC.

Are you interested in alternative investment opportunities? We may be able to match you with the perfect investment opportunity for your IRA portfolio.

Review the charts below! The alternative investing opportunities are virtually endless!

List Of Allowable IRA Investments:

Real Estate IRA	IRA Lending	Private Investors
Residential Real Estate	Trust Deeds	Limited Liability Companies
Commercial Real Estate	Mortgages	Partnerships
Foreclosure Property	Loan and Mortgage Pools	Private Corporations
Foreclosure Property	Private Loans	Joint Ventures
Foreign Real Estate		Private Equity
Foreign Real Estate		Warrants

Asset-Backed Paper	Tax Liens/Deeds	Offshore Investments
Account Receivables	Public Tax Sales	Foreign Currency
Factoring	Private Tax Sales	Forex stocks, Bonds, and Mutual Funds
Note Buying	Auctions	Foreign property
Structured Settlements

Precious Metals IRA	Conventional Assets	Alternative Investments
Gold IRA	Stocks	Domain Names
Factoring	Bonds	Stock Options
Silver IRA	Mutual Funds	Futures Contracts
Platinum IRA	CDs	Commercial Paper
Palladium IRA	ETFs	Oil and Gas etc.
Physical Possession	REITS
or Safety Deposit Box	T-Bills

What are the prohibited transactions?