What is a prohibited transaction?

A prohibited transaction occurs when your IRA engages in a transaction that directly or indirectly benefits you or another “disqualified person” instead of serving the IRA exclusively for retirement purposes.

Under Internal Revenue Code Section 4975, prohibited transactions generally involve:

• Using IRA assets for personal benefit

• Buying from, selling to, or lending money to yourself or certain family members

• Paying yourself (or a disqualified person) for managing IRA-owned property

• Personally guaranteeing an IRA loan

Who is a disqualified person?

Disqualified persons typically include:

• You (the IRA owner)

• Your spouse

• Your lineal ascendants and descendants (parents, grandparents, children, grandchildren) and their spouses

• Certain fiduciaries or advisors

• Businesses you or other disqualified persons control

Why it matters

Engaging in a prohibited transaction can result in the disqualification of your IRA and the loss of its tax-advantaged status, potentially triggering taxes and penalties.

Because prohibited transaction rules can be complex, review IRS guidance carefully and consult a qualified tax or legal professional before entering into a transaction involving your IRA.

Please review STRATA's Rules and Regulations page for more information.