Self Directed IRA’s open up a whole new world of alternative investment options. The short answer is you can invest in anything as long as it is legal. Real estate – directly or indirectly, Reits, tax liens, deeds of trust and precious metals are just part of the investments available.
However, you should be aware of the Prohibited Transactions (PTs) and Disqualified Persons rules. If the IRS audits you and they determine you have broken these rules, the penalty can be severe.
“There are certain investments which are not allowed in a self directed IRA.”
Disqualified persons are people who “cannot receive any immediate benefit nor extend any immediate credit” to the plan. In plain English, the plan cannot invest in anything that benefits a disqualified person and a disqualified person cannot guarantee any investment the plan makes. An example of a disqualified person would be: your self directed IRA purchases a condo for rent and your daughter (being a disqualified person) moves in – this would not be good. The IRA is allowed to buy the condo but disqualified persons cannot use or “benefit” from it. There are too many prohibited transactions to list here but the main one would be self-dealing.
Please visit us at Self Directed Retirement Plans LLC or call 866 639 0066 and we can discuss in more detail PTs and Disqualified Persons.