Can My IRA Loan Funds to Family Members or to an Entity That I or a Family Member Owns or Controls?

If your IRA loans funds to certain family members (lineal descendants and spouses of lineal descendants) or an entity that you or certain family members own or control (whether controlled individually or as an officer of a corporate general partner, managing member, etc.), the transaction could possibly be a prohibited transaction under Internal Revenue Code Section 4975.

STRATA’s policy on this issue is that if you or another disqualified person is an officer or director of the borrowing entity (or an officer or director of a corporate general partner, managing member, etc.), and you will collectively own 10% or more of the entity, then you will need to obtain a legal opinion from an ERISA or tax attorney addressed to you in which the loan transaction is discussed in detail prior to STRATA processing your investment instructions.

If you, any family member or disqualified persons collectively will own 50% or more of the borrowing entity, STRATA will not process the investment even if you are able to obtain a legal opinion.