What Triggers a Self-Directed IRA Prohibited Transaction?
The IRS may assess a prohibited transactions tax if they learn that you have made a prohibited investment, or if your Self-Directed IRA has engaged in a transaction with a prohibited individual.
Self-Directed IRA Prohibited investments include the following assets:
- Life insurance
- Certain kinds of precious metals
- Art
- Alcoholic beverages
- Collectibles
- Using the Self-Directed IRA or assets within it as collateral for a loan (other than a non-recourse loan within your IRA)
Additionally, you must comply with the following restrictions on Self-Directed IRA prohibited individuals:
- Neither you, your spouse, your descendants or ascendants, nor their spouses, nor any entities they control can lend to your Self-Directed IRA, nor borrow from it.
- No prohibited individual can buy assets from or sell assets to your Self-Directed IRA, nor may any entity they control.
- No prohibited individual can buy or sell services directly from or to your Self-Directed IRA, nor may any entity they control.
- Neither you nor any prohibited individual can use Self-Directed IRA assets for their own benefit. For example, they cannot stay overnight in a property owned by your Self-Directed IRA, even if they pay rent.
