Using your IRA for Business

There are promoters all over the internet advocating that you can start and/or fund your own business or real estate venture using your personal IRA account. “You can turn it into a checkbook IRA,” they will happily assert (as they charge you large fees). They will have you transfer your IRA monies to a self-directed IRA account and claim that you can then direct the money to be used to invest in your new business or loan monies to an existing business.

The IRS calls this a prohibited transaction. Does that sound like a good thing?

The intent of IRAs is to accumulate monies for retirement, not to engage in self-dealing transactions.  As such, the following transactions are not allowed:

•   Selling or leasing any property between a plan and a disqualified person. (Disqualified persons including spouses, parents, children and most notably include you.) Your IRA cannot buy property you currently own from you.

•   Lending money or extending credit between a plan and a disqualified person. You cannot personally guarantee a loan for a real estate purchase by your IRA or loan money to your personal business.

•   Furnishing goods or services, between a plan and a disqualified person. You cannot use personal furniture to furnish your IRAs rental property.

•   Using property owned by the plan for your benefit. Your IRA cannot buy a vacation property that you or family members will use.

•   Receiving any consideration. You cannot pay yourself income from the plan from profits generated from your IRAs rental property.

Beware those making inaccurate claims about what you can do with your IRA.

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