Prohibited Transactions

A prohibited transaction occurs when a self-directed IRA is used in a way that violates IRS rules, particularly through transactions involving the IRA owner or other disqualified persons.
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While self-directed IRAs offer flexibility in holding alternative assets, certain transactions are restricted under Internal Revenue Code (IRC) Section 4975. These rules are designed to prevent improper personal benefits and conflicts of interest involving retirement funds.
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Engaging in a prohibited transaction can result in significant tax consequences, including the potential loss of the IRA's tax-advantaged status.
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Before entering into a transaction, consult a qualified tax or legal professional to ensure compliance with IRS requirements.
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• Borrowing money from your IRA.
• Using IRA funds to purchase property for personal use.
  
• Selling, exchanging, or leasing personally owned property to your IRA.
• Personally receiving rental income from property owned by your IRA.
• Lending IRA funds to a disqualified person.
• Providing goods, services, or facilities between your IRA and a disqualified person.
• Transferring IRA income or assets to a disqualified person for their benefit.
• Allowing a disqualified person to use IRA assets for personal benefit.
• Using your IRA as security for a personal loan.
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Under IRS rules, certain individuals and entities are considered disqualified persons and are generally restricted from engaging in transactions with your self-directed IRA.Disqualified persons may include:

• You, as the IRA owner, and your spouse.
• Your lineal descendants (children and grandchildren), lineal ascendants (parents and grandparents), and their spouses.
• Individuals or entities with authority or control over your IRA assets.
• Individuals or entities providing services to your IRA, including custodians and certain advisors.
• Certain employers and employee organizations associated with the IRA.
• Businesses, partnerships, trusts, or estates in which disqualified persons hold a significant ownership interest, generally 50% or more.

In addition to these asset restrictions, certain transactions involving an IRA owner or other disqualified persons are prohibited under IRS rules.