Quest Expo 2022: The 3rd Annual Quest Expo returns to Houston September 23rd – 25th for an event-filled weekend that we’ve all been waiting for! Click here to learn more.

Pay Online

Contact

Call: 855-386-4727

Client Portal

Pay Online

Contact

Call: 855-FUN-IRAS

Client Portal
  • Home
  • Education
    • Education Center
    • SDIRA Video Library
    • Upcoming Webinars (Live)
    • Our Blog
    • IRA Education Articles
    • Due Diligence
    • Prohibited Transactions
    • Security Awareness
    • FAQs
  • Open an Account
    • Traditional IRA
    • Roth IRA
    • SEP IRA
    • SIMPLE IRA
    • Health Savings Account (HSA)
    • Coverdell Education Savings Account (ESA)
    • Solo 401(k)
    • Checkbook Control IRA LLC
    • Referral Program
  • Investments
    • The QTC Investment Hub
    • Real Estate
    • Promissory Notes
    • Private Entities
    • Cryptocurrency Investing
    • General Investments
    • Fair Market Values (FMV)
  • Forms
  • Events
    • The Quest Expo
    • SDIRA LIVE Webinars
    • Quest Special Events
    • Houston Events
    • Dallas Events
    • Austin & San Antonio Events
    • Other Cities – tbd
    • Invite Quest to Speak
  • About
    • Mission Statement
    • Client Testimonials
    • Executive Team
    • Meet the Management & Education Team
    • FDIC: Federal Deposit Insurance Corporation
  • Client Portal
  • Contact Us
    • Make a Payment
    • General Contact Information
    • Contact a Certified IRA Specialist
    • Career Opportunities
    • Coronavirus (COVID-19) Resource
Quest Trust Company›Blog›Can Quest Trust Company purchase an investment ?›The Most Common Self-Dealing “Gotchas” for Self-Directed IRAs

The Most Common Self-Dealing “Gotchas” for Self-Directed IRAs

Posted on October 12, 2012 by questadmin
Estimated reading time: 3 minutesLast updated on: October 12, 2012

Along with the greater flexibility and freedom that you’ll have with a self-directed IRA, you’ll have to make sure you don’t inadvertently violate any of the rules that prohibit any “self-dealing” within your account. Broadly defined, “self-dealing” means using the account funds for your benefit, or the benefit of any “disqualified person” – which includes certain members of your family

Traditional IRA custodians will generally only permit you to buy and sell publically traded stocks and securities on the big exchanges, as well as some bonds and other types of debt instruments. In these types of accounts, it would be difficult to violate any of the rules on prohibited transactions or self dealing.

Here are some of the most common self-dealing “gotchas” that you need to be on guard against when you open a self-directed IRA.

Purchasing Real Estate. If you want to use your self-directed IRA to purchase real estate, you can’t direct you account to buy real estate that you currently own or have an interest in. Furthermore, your self-directed IRA may not permissibly purchase real estate that’s owned by any of your children, grandchildren or great grandchildren, or by your parents or grandparents.

Paying Real Estate Taxes or Management Fees. When you hold real estate in your self-directed IRA, you’ll need to have enough resources within your account to pay your taxes. These funds can come from annual contributions to your account (if you are eligible to make contributions in that tax year, depending on whether you’ve set up your self-directed IRA to be a traditional IRA or a Roth IRA), from an eligible rollover, or be income generated from within your account.

Note that if you don’t have sufficient funds within your account, you are not permitted to pay your taxes, management fees or other carrying costs of the property with money from elsewhere. Paying any of these fees or expenses with funds from outside the account (such as writing a personal check to pay the necessary expenses) can put the tax-advantaged status of your entire account at risk.

Prohibited Stock Transactions. While your self-directed IRA can purchase and hold stock, you cannot purchase that stock from yourself or any other disqualified person. This is true even if you seek to sell the stock at its current market price. This is also true for stock or other ownership interests in corporations, partnerships, limited liability companies or other entities in which you hold a controlling interest. Furthermore, you cannot use your self-directed IRA to purchase any restricted securities from any family member or other disqualified persons.

Prohibited Transaction Types. Finally, even though your self-directed IRA has great investment flexibility, there are still some types of transactions that are prohibited (such as buying life insurance policies or collectibles with your account assets). Make sure you know these prohibitions and follow them.

Having an experienced custodian for your self-directed IRA, such as Quest Trust Company, can be invaluable for avoiding these costly mistakes. Quest Trust Company provides you with educational materials and expert assistance so that you’re always on top of your account.

Posted in Can Quest Trust Company purchase an investment ?Tagged A Self Directed Ira, Directed Ira, Individual Retirement Account, Ira Custodian, Ira Investments, Self Dealing, self directed ira, Self Directed Iras
  • Open an Account
  • Download Forms
  • See our Events

Contact an IRA Specialist

  • Get Your Tickets to the 3rd Annual Quest Expo!

    Get Your Tickets to the 3rd Annual Quest Expo!

    Last updated on: June 21, 2022  Join the #1 Alternative Investing Conference of the Year! In the fast-paced investment industry, timing is everything and by attending the largest alternative investing conference in the Nation, you’ll be on the cutting edge! Attendees can experience fresh takes on proven real estate concepts, with plenty of the Quest […]

    Register NowSee All Events
  • The SDIRA Social

    The SDIRA Social

    Last updated on: June 21, 2022Browse all of our upcoming events here!  Tapping into TRILLIONS of dollars’ worth of investment capital for your real estate deals is easier than you think. All it takes is the right conversation, and you could potentially unlock unlimited capital for your deals. If you’re looking for ways to increase […]

    Register NowSee All Events
  • Our transition from Bancorp South Bank to Frost Bank

    Our transition from Bancorp South Bank to Frost Bank

    Last updated on: December 20, 2021We expect this transition to be smooth and easy, requiring almost no changes on the client end! There are no new systems to learn nor any account changes to make. The only update to be aware of is the new Incoming Funds Instructions. The old instructions for Bancorp South will […]

    Register NowSee All Events
  • Introducing our new QTC Investment Hub!

    Introducing our new QTC Investment Hub!

    Last updated on: December 20, 2021With this new feature, you can now submit investments directly through the client portal and track your investments in real time!

    Register NowSee All Events
  • Virtual Classes + Networking

    Virtual Classes + Networking

    Last updated on: June 21, 2022Check out our full class schedule here! Our weekly Quest webinars give you access to unlimited free education! Get the knowledge to help grow your retirement at one of our weekly classes on Tuesdays and Saturdays at 12PM CT! And don’t miss our Virtual Networking Happy Hours on the 4th […]

    Register NowSee All Events

More Upcoming Events

  • Houston Events
  • Austin Events
  • Dallas Events
  • Upcoming National Webinars
  • Client Referral
  • Blogs
  • Security Awareness
  • Testimonials
  • Due Diligence
  • FAQs
  • FDIC Insurance
  • Career Opportunities
  • Contact Us
  • The Quest Expo

Connect with Us:

DISCLAIMER: Quest Trust Company does not render tax, legal, accounting, investment, or other professional advice. If tax, legal, accounting, investment, or other similar expert assistance is required, the services of a competent professional should be sought.

© 2021 Quest Trust Company. View our Terms of Use.

© 2021 Quest Trust Company. View our Terms of Use.