Forbes has published an article, “Tax Court Shows Some Risks of Using Self-Directed IRAs”, which discusses the complications that may arise from using true self-directed IRAs. The article begins as follows:
True self-directed IRAs are becoming more popular among IRA owners. But the rules can be complicated and tricky. Two recent court cases show the risks of investing through self-directed IRAs can be extra taxes and penalties when all the rules aren’t followed.
Many IRA custodians say they offer self-directed IRAs. In fact, most IRA custodians limit the investments that can be held in their IRAs. Investments generally are limited to publicly-listed stocks, bonds, mutual funds, exchange-traded funds, and a few other investments.
A true self-directed IRA can be invested in any investment an IRA legally can own. The tax code prohibits IRAs from owning life insurance and collectibles. Any other investment is allowed unless it violates the prohibited transaction rules, which generally allow debt or self-dealing between an IRA owner and the IRA. The true self-directed IRA can own real estate, mortgages, small business interests, hedge funds, and more.
Click here to see the full article: “Tax Court Shows Some Risks of Using Self-Directed IRAs”
Posted by Marin Larkin, Associate Editor, Wealth Strategies Journal.