What are prohibited transactions?
A prohibited transaction is any improper use of an IRA account or annuity by the IRA owner, his or her beneficiary, or any disqualified person.
- An IRA cannot invest in life insurance or collectibles.
- An IRA cannot invest in S-corporation stock.
- An IRA owner cannot buy property for personal use with IRA funds.
- An IRA owner cannot borrow money from their IRA.
- An IRA owner cannot use IRA assets as collateral for a loan.
- An IRA owner cannot execute a direct or indirect sale, exchange, purchase, or lease of property between the IRA and a disqualified person (yourself, spouse, parents, grandparents, children and their spouse, grandchildren and their spouse).
- An IRA owner cannot (directly or indirectly) furnish goods, services, or facilities between the IRA and a disqualified person.
- An IRA owner cannot invest in something where they personally benefit from the investment either monetarily or non monetarily. An example would be receiving compensation as a real estate agent or being given free perks or privileges because of an IRA’s investment.
- An IRA owner or disqualified party cannot put any sweat equity into an investment (such as cutting grass or fixing the roof on a real estate investment).