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A 62-year-old man planned to lend his daughter $80,000 directly from his self-directed IRA so she could cover a cash shortfall in her small business, with the loan structured to pay interest back to the IRA rather than to a bank. Before signing anything, his accountant warned him that the transaction wasn't merely risky—it would be a prohibited transaction under the federal tax rules governing IRAs.
Backing away isn't being overly cautious. A loan from an IRA to a child is a textbook prohibited transaction, and unlike a bad investment that simply loses money, a prohibited transaction can cause the IRA to lose its tax-advantaged status, potentially treating the account as distributed for tax purposes as of the first day of that year.
Don't Miss:
This Jeff Bezos-backed platform lets eligible investors buy fractional shares of rental properties for as little as $100.
#year #miss
A 62-year-old man planned to lend his daughter $80,000 directly from his self-directed IRA so she could cover a cash shortfall in her small business, with the loan structured to pay interest back to the IRA rather than to a bank. Before signing anything, his accountant warned him that the transaction wasn't merely risky—it would be a prohibited transaction under the federal tax rules governing IRAs.
Backing away isn't being overly cautious. A loan from an IRA to a child is a textbook prohibited transaction, and unlike a bad investment that simply loses money, a prohibited transaction can cause the IRA to lose its tax-advantaged status, potentially treating the account as distributed for tax purposes as of the first day of that year.
Don't Miss:
This Jeff Bezos-backed platform lets eligible investors buy fractional shares of rental properties for as little as $100.
#year #miss
7 days ago
