4975 of the Internal Revenue Code defines prohibited transactions.Generally, they are transactions that
directly or indirectly benefit the owner of the IRA or 401(k).The owner of the account is a disqualified
person – you.Also included are your
spouse, parents, grandparents, children, spouse’s children, any fiduciary of
the plan, and any person providing services to the plan.Also disqualified would be any company or
entity where you, the plan owner, have more than 50% interest.
What is a
prohibited transaction is a transaction (sell, exchange, lease, lend, services,
asset transfer, use of income) with a disqualified person.
Who is not
and sisters are ok.Also included are your
spouse’s brothers and sisters, you spouse’s parents, your spouse’s
grandparents, your stepchildren, your spouse’s stepchildren (except your
children!) your aunts, uncles and cousins. Isn’t this fun?
of the best charts I have found on these topics is found on page 132 of Pat
Rice’s book on IRA wealth.You should
all own this book:IRA Wealth:
Revolutionary IRA Strategies for Real Estate Investment, Patrick Rice.It is one of the early and most useful places
to get you going on the possibilities of IRA investing.The book does not cover 401(k) topics,
however.It is available at all the
usual places, including Pat’s website http://www.iraresource.com.
So what does
all this mean?
is your self-directed fiduciary responsibility to invest your retirement
dollars for the greatest return.The intent
of the retirement account is not to benefit you now, but later in your
retirement years.So do not go out to
the ocean purchase a house for personal vacation use, or make loans to your
kids for college.Be wise in your
investments, grow your account and stay out of trouble with the IRS.