What is a Prohibited Transaction?

Internal Revenue Code Sections 4975 & 408 prohibit fiduciary and other Disqualified Persons from engaging in certain types of “prohibited transactions”. “Prohibited transactions” are any direct or indirect:

Fiduciary prohibited transactions appear to be the most common type of prohibited transaction in the self-directed IRA context. The IRA owner is a fiduciary to a self-directed IRA and cannot use the IRA funds to directly or indirectly benefit himself. The fiduciary prohibited transaction rules under Code Section 4975(c)(1)(D) and (E) are applicable, regardless of whether there is a disqualified person on the other side of the transaction.

The fiduciary prohibition transaction rules do not permit IRA owners to direct the IRA trustee to enter into any transaction in which the owner has an interest that may affect the “exercise of his judgment as a fiduciary” (the typical conflict of interest situation).

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


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