What you can't do in an IRA with real estate
- Your IRA cannot directly or indirectly buy real estate from a "disqualified person". Who is a disqualified person?
- The IRA owner;
- the IRA owner's spouse, descendant (e.g., son), or ascendant (e.g., mother);
- spouse of a descendant of the IRA holder;
- a fiduciary of the IRA or person providing services to the IRA (e.g., the trustee or custodian);
- an entity at least 50% of which is owned (or at least 50% of the beneficial interests are held) by a combination of the above (e.g., if you and your spouse own 50% of an LLC, that LLC is a disqualified person with respect to your IRA); or
- a 10% owner, officer, or director or highly compensated employee of such an entity.
- You cannot have your IRA enable an investment for yourself or another disqualified person. In other words, if the IRA's investment is deemed essential to accomplishing a transaction in which both you and your IRA invest, then the transaction would be considered a prohibited transaction.
- Your IRA cannot purchase a real estate asset and then have a disqualified person use it while it is in the IRA. For example, you cannot buy a vacation home and use it partly for personal use, even though you might rent it to unrelated persons the rest of the year.
