The decision to purchase real estate with your retirement funds is a great way to take advantage of the benefits of a self-directed IRA. However, property investments are also governed by rules that investors must familiarize themselves with and follow.
In order to avoid penalties and excess tax payments on the real estate investment properties in your self-directed IRA, you must adhere to certain regulations regarding prohibited transactions and disqualified persons. A prohibited transaction is defined as any improper use of your IRA by you or any disqualified person.
Many prohibited transactions stem from the involvement of a disqualified person. The following people are considered disqualified persons for the purposes of your self-directed IRA:
Examples of prohibited transactions in a real estate IRA may include: