Can I invest IRA funds in closely held enterprises?
Closely held enterprises are businesses that are owned by a small group of people. IRA owners are often presented with opportunities to invest IRA funds in an existing or new private enterprise, including one that is closely-held. Prohibited transactions can occur when a disqualified person has a relationship with the closely held company. Also if the company is an operating business, it may generate “unrelated business income” (UBI) for the IRA. IRA transactions should be reviewed by a professional to avoid significant tax consequences from prohibited transactions and UBI. Careful planning will often enable an IRA to invest in a closely held enterprise with little tax risk. An experienced attorney or tax practitioner familiar with prohibited transactions and UBIT issues should be consulted if you’re considering making such an investment.
