What Is a Prohibited Transaction?

In general, Internal Revenue Code Section 4975 defines a prohibited transaction as a transaction between a plan (your account) and a disqualified person. Generally, "disqualified persons" are defined to be the account holder, other fiduciaries, certain family members (lineal descendants and spouses of lineal descendants) and businesses under the account holder’s (or disqualified person’s) control.

The prohibited transaction rules prohibit an IRA from acquiring a piece of property which will be purchased from or used personally by the account holder or other disqualified persons.