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Top 10 Mistakes People Make with Self Directed IRAs Part 2


We are continue a post that we started last week entitled Top 10 Mistakes People Make with Self Directed IRAs Part 1. As we continue this post we will now touch on five more mistakes that are common among self directed IRAs. As always, we are here to help those of you who need a self directed IRA or can answer any questions. Feel free to contact us at any time for professional information.

  1. No Rules Can Be Violated When Dealing With A non-Disqualified Party

    One of the key tenets of IRAs is there is a specific list of persons and entities which are prohibited from interacting with your IRA. This leads people to believe that if you are not on the “list” (IRC 4975), then any transaction would be allowed. Click the header to learn more.

  2. Self directed IRA owner attempts to receive fees and commissions from IRA transactions

    There are cases where the self directed IRA owner is a real estate agent and they want to earn a commission from selling property to their IRA or some other disqualified party’s self directed IRA. Such a transaction would be viewed as conducting a transaction with your IRA or receiving an indirect benefit.
    Click the header to learn more.

  3. IRA owner loans money to a third party with equity kicker in order to avoid UBTI

    Click the header to learn more.

  4. Two or more IRA owners agree to “loan” each other money to avoid prohibited transactions

    Interacting with your IRA is considered a prohibited transaction. So, unrelated, self directed IRA owners will attempt to enter into a reciprocal agreement to loan each others self directed IRA money so that the IRA owners can indirectly tap their funds for personal use.
    Click the header to learn more.

  5. Self Directed IRA Owners Flipping Real Estate is Not UBTI

    The receipt of rental income is considered to be passive income and therefore not subject to UBTI. However, some self directed IRA owners fall into the trap of thinking that this means that they can buy and sell properties on a routine basis (i.e. flipping).
    Click the header to learn more.

The information contained in this publication is intended for educational and informational purposes only. If you have a specific situation that requires interpretation as relates to self directed IRA and prohibited transactions you should seek the advice of a tax advsior.

Read the first five mistakes at Top 10 Mistakes People Make with Self Directed IRAs Part 1

Author: , Self Directed IRA Professional