Self Directed IRA Questions Part Two
To continue from our last article about a Self Directed IRA, another question often asked is, "What kinds of retirement accounts can be moved into Self Directed IRA status?" Traditional IRAs, Sep IRAs, Roth IRAs, 401k, and 403b plans can all be moved. Coverdell Education Savings, Qualified Annuities, Profit Sharing Plans, Money Purchase Plans, Government Eligible Deferred Compensation Plans and Keoghs can also be used.
Another common question is, "How do I know this is legal?" Many accountants and CPAs will tell you it isn't legal, or is very dangerous to do. Due to the passage of ERISA in 1975, it is legal as we discussed in our last article. The legalities can be found by going to the IRS website and requesting Publication 590. Check on pages 40-41 to see what investments are not allowed.
"Should everyone do this? Is this right for me?" The obvious answer to the first question is no, not everyone should do this, nor will everyone want to do this. Deciding if it is right for you depends on your interest level, expertise and desire to self direct your investments. Some people are happier leaving things as they are. If you do decide to self direct, the advantage is that you can continue to invest in stocks and bonds, while also investing in real estate.
"Are there certain investments that are disallowed?" The answer is "Yes." As mentioned previously, the IRS code prohibits investing in life insurance contracts and collectibles. The prohibited transactions are outlined in IRC 4975 (c)(1) and IRS Publication 590. Remember that every transaction the Self Directed IRA engages in must be for the exclusive benefit of that IRA - you can't use your IRA funds to benefit yourself.
"What transactions are prohibited?" According to the IRC 4975 (c)(1), prohibited transactions include direct and indirect selling, exchanging or leasing of any property between a plan and a disqualified person. It prohibits lending money or other credit between a plan and a disqualified person. It prohibits furnishing goods, services or facilities between a plan and disqualified person.
You can't transfer or use the income or assets of a plan for the benefit of a disqualified person. A fiduciary can't use the income or assets for his own interest or account. A disqualified person cannot receive any consideration for his personal account any income or assets from any party dealing with the plan.
So, "Who is a disqualified person?" The following are listed by the IRC as being disqualified: the IRA holder and his or her spouse; the IRA holders ancestors or descendants and their spouses. Any investment managers and advisers are also disqualified. Any corporation, partnership, trust or estate in which the IRA holder has a 50% or greater interest is also disqualified. Anyone providing services to the IRA such as a trustee or custodian is also disqualified.
A note of caution is to not play games with the disqualification provision of an IRA holder who has 50% or greater interest in an investment. Don't try to change it to look like they have 48% interest in the investment. Don't follow this kind of advice if you are urged to do so.
Article Source: FxTradingStock.com
About the Author
As a leading provider of self directed IRA and self directed 401k products, administrative and custodial services, NAFEP focuses on helping you succeed.
by: John Coktostin
Total views: 24
Word Count: 536
Date: Wed, 14 Jul 2010
Publish/Share this article
To use this article on your site click here to get the HTML code
Rating: Not yet rated
Login to vote
Related Articles
How to Invest in 2011 and Beyond Without a ClueWhat Is Forex Trading?
Quick Way To Trade In Shares
ATM Calendar Spreads, Are You Aware Of The Hidden Gotchas?
Emini Day Trading Requirements
The Coming Death Of The Dollar
Fantastic Fundraising Suggestions
Winning Big In The Share Market
