Self-Directed IRA IRS Rules

Self-Directed IRAs are generally permitted to engage in most types of investments.  However, if a Self-Directed IRA engages in certain types of “prohibited transactions” or invests in life insurance or collectibles you may jeopardize the tax-deferred status of your IRA account. This could lead to the disqualification of the IRA and severe tax consequences. Therefore, you must familiarize yourself with the Self-Directed IRA IRS Rules.

• Internal Revenue Code Section 408 – IRC provision prohibiting IRAs from investing in life insurance contracts.
• Internal Revenue Code Section 4975 – IRC provision referencing tax on prohibited transactions.
• Internal Revenue Code Section 408(e)(2) – IRC provision describing an IRA’s loss of tax-exempt status upon engaging in a prohibited transaction.
• Internal Revenue Code Section 408(e)(4) – IRC provision describing effect of pledging an IRA or any IRA assets as security for a loan.
• Internal Revenue Code Section 408(m) – IRC provision describing impermissible investment in collectibles.
• Internal Revenue Code Section 512 – IRC provision describing unrelated business taxable income
• Internal Revenue Code Section 511 – IRC provision imposing tax on unrelated business income.
• Internal Revenue Code Section 513 – IRC provision describing an unrelated trade or business.
• IRS Publication 590 – Individual Retirement Arrangements (IRAs)
• IRS Topic 451 – Individual Retirement Arrangements (IRAs)

To learn more about the Self-Directed IRA IRS rules, please contact a Self-Directed retirement expert at 1-800-472-1043.