What happens if a Traditional IRA is used in a Prohibited Transaction?

If a contributor to an IRA or his or her beneficiary engages in a transaction prohibited by Internal Revenue Code Section 4975 , the account ceases to qualify as of the beginning of the year in which the transaction occurs, and the account balance is deemed distributed at that time. However, the excise taxes normally imposed on prohibited transactions do not apply to an IRA contributor to whom the IRA is deemed distributed under the foregoing rule.

Please contact one of our IRA Experts at 800-472-0646 for more information.