Smart Retirement Savings

The Fastest Way To Blow Up Your IRA

Do you think the Real Estate IRAs fancy? A misstep and you can destroy all the tax savings you are entitled to in an Individual Retirement Account (IRA). Take this Fairmark Tax Tips to the heart and forget about mixing real estate investment with IRA.

Prohibited Transactions

A prohibited transaction occurs when you interact with your IRA in certain ways. Here are some of the things you aren't allowed to do:

You can't sell property to your IRA, or buy property from your IRA.
You can't loan money to your IRA, or borrow money from your IRA.
You can't use the account, or any part of it, as security for a loan.
You can't receive goods or services from your IRA, or provide goods or services to your IRA.
You aren't allowed to do any of these things directly or indirectly. That means you can't avoid this rule by having your IRA deal with a company you own, or with a family member. And these are outright prohibitions: they aren't allowed even if you do everything in a fair and reasonable manner.

Poor Disclosure

Many people who buy real estate in their IRAs are unaware of these rules. Companies that promote real estate investments for IRAs may mention the issue in general terms, but rarely make adequate disclosure. They don't want to discourage you from using their services, so they make a vague reference to some rules you should discuss with your tax professional. They're aware that many of their customers won't bother to check with a pro, and besides, there are plenty of tax professionals who don't know these rules.