Can I Sell an Asset to My IRA?

Many individuals mistakenly believe they can sell property owned by their IRA without violating prohibited transactions rules, however this is often not the case.

Self-dealing rules exist to prevent individuals and disqualified parties from reaping personal gain through transactions undertaken within an IRA or pension plan. Violating these regulations could result in fines and taxes being levied against you.

In-Kind Distributions

Distribution-in-kind transfers refer to any asset transfers made without liquidating assets into cash, often leading to lower tax liabilities than selling and then repurchasing investments into taxable accounts. For instance, if company stock held within an IRA needs to be distributed as required minimum distributions (RMDs), but you cannot afford selling and then repurchasing them, sending these shares directly from an IRA into a brokerage account might make more sense than selling and then repurchasing later on.

This strategy may also make sense if your IRA contains illiquid assets like real estate, precious metals, fine art and classic cars – which may not be easy to sell quickly due to market timing risks if liquidated as required for your RMD obligation. By transferring them in-kind instead, however, taxes would only apply at their fair market value at time of transfer and no market timing risks would arise from liquidating such investments for RMD purposes.

Joint Ventures

Joint ventures are an arrangement that enables two or more businesses to combine resources on one specific project. Their duration and resource contributions may differ, yet all parties involved usually agree to share in any profits that result from this venture.

IRA investors can take advantage of opportunities that would be cost prohibitive for themselves alone, without incurring the additional expense of paying taxes on each investment directly or indirectly to another disqualified person, including spouses, lineal relatives and certain fiduciaries. It is important to remember that prohibited transactions can take place if an IRA investor provides direct or indirect benefits to any of these disqualified people including spouses, lineal family members and certain fiduciaries who provide a benefit or service in exchange for something from them – this may incur taxes liability liability depending on which state laws they fall under.

Custodians and plan providers often promote the ability to combine an IRA with funds belonging to disqualified people; it is technically possible in certain circumstances; American IRA recently published an in-depth article about it that provides valuable reading materials for those wanting more information.

Co-Investment

Self-directed retirement accounts allow you to invest in a range of assets, such as real estate, tax liens, private equity and precious metals. But it is important that when investing in non-traditional asset classes like these that you understand any restrictions that govern them and comply with applicable laws to avoid violating any prohibited transactions.

As an example, you cannot invest your IRA in rental properties you personally own; that would constitute self-dealing transactions and would also constitute prohibited transactions. Furthermore, purchasing raw land to hunt on is also forbidden; however you could still have your IRA purchase land from someone else and rent it back out as long as that person doesn’t fall into disqualified categories.

Disqualified Persons

As part of their tax-exempt status, retirement plans and trusts must abide by stringent IRS rules regarding prohibited transactions and self-dealing transactions that could violate these restrictions, with penalties including disqualification of an entire IRA account as well as personal liability for fiduciaries and trustees.

Disqualified parties include you, as the IRA owner; your spouse; any lineal ascendants or descendants who aren’t your children or grandchildren; as well as fiduciaries such as custodians and service providers who assist your IRA. There may be exceptions to this rule, such as offering interest-free loans to pay incidental business costs or ordinary operating expenses.


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