What are IRA Prohibited Transactions?
Understanding what constitutes a prohibited transaction is very important when it comes to making investments within your IRA. The IRS defines a prohibited transaction as follows: “Generally a prohibited transaction is any improper use of your IRA account or annuity by you, your beneficiary or any disqualified person. Disqualified persons include your fiduciary and members of your family (spouse, ancestor, linear descendant, and any spouse of linear descendant).” IRS Publication 590, IRC 4975 is the section that lays out the rules on prohibited transactions. Prohibited transactions generally involve one of the following: (1) doing business with a disqualified person (2) benefiting someone other than the IRA (3) loaning money to a disqualified person (4) investing in a prohibited investment. In plain English, prohibited transactions are those transactions that violate the basic intent of the IRA. Your IRA must benefit rather than benefiting you personally. In other words, there can be n
