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Is my spouse a Disqualified Person for the IRA prohibited transaction rules?

Yes – if you engage in a transaction involving your IRA funds and your spouse and the transaction benefits your spouse in any way personally, either directly or indirectly, the transaction would likely be treated as a prohibited transaction pursuant to Internal Revenue Code 4975.

The definition of a “disqualified person” (Internal Revenue Code Section 4975(e)(2)) extends into a variety of related party scenarios, but generally includes the IRA holder, any ancestors or lineal descendants of the IRA holder, and entities in which the IRA holder holds a controlling equity or management interest. Therefore, one should not engage in any transaction with a spouse in connection with an IRA or 401(k) investment. In other words, one should not use IRA or retirement funds with a spouse’s personal funds or in any way that transfers any cash, assets, or benefit to that spouse personally. Note – spouses can use their IRA or 401(k) plan fund assets to make investments together, but only retirement funds can be used – no personal funds can be used.

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