Are you aware of what constitutes prohibited IRA transactions as an IRA owner? Many IRA holders unknowingly engage in activities that could result in severe penalties and taxes. Understanding these rules is crucial to protecting your retirement savings.
A prohibited transaction occurs when an IRA owner uses IRA assets in a self-serving or self-dealing manner that improperly benefits them. Such transactions can have significant tax implications and penalties. Identifying and avoiding them is essential for safeguarding your retirement assets.
Key Considerations to Avoid Prohibited IRA Transactions:
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Exclusively Benefit the IRA:
Ensure all IRA transactions benefit the IRA itself. Conduct transactions at arm’s length and current market rates. Any action that directly benefits you, outside of the IRA’s growth, could be deemed prohibited.
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Separate Personal and IRA Assets:
Do not combine personal assets with IRA assets. For instance, if your IRA owns a rental property, you cannot use it for personal purposes, even if you pay market rent. Keeping personal and IRA assets strictly separate is essential.
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No Borrowing or Lending as these are Prohibited IRA Transactions
You cannot borrow from your IRA, lend to your IRA, or pledge IRA assets as collateral for a loan. Any such transactions are strictly prohibited and could lead to significant penalties.
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Be Wary of Promotional Scams:
Be cautious of promoters who claim their strategy is approved by the IRS. The IRS does not approve or recommend specific IRA transactions or investments. Such claims are often misleading and can lead to prohibited transactions.
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Complex Transactions by Comparison could indicate Prohibited IRA Transactions
Transactions involving multiple entities to accomplish a strategy that wouldn’t normally be allowed in an IRA are likely prohibited. If a deal seems overly complex or too good to be true, it’s best to seek professional advice.
To further assist you in understanding and avoiding prohibited transactions, we’ve also created a free guide: “Protecting an IRA from Prohibited Transactions in 5 Easy Steps.” [Click below to download]
For personalized advice and to learn more about the rules surrounding your retirement accounts, contact me, Chris Robinson, at RFG Wealth Advisory in Argyle, TX. Let’s schedule a time to discuss how to identify and avoid prohibited IRA transactions and secure your financial future.
At RFG Wealth, we always put our client’s interests first and have a transparent fee structure for your peace of mind. Don’t wait until it’s too late.
Protect your retirement assets and ensure your financial success. Call us today!
Investment advice is offered through RFG Wealth Advisory, a Registered Investment Advisor.
