Discussion:IRA and PE investment

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Discussion Forum Index --> Advanced Tax Questions --> IRA and PE investment


Discussion Forum Index --> Tax Questions --> IRA and PE investment

Greenville (talk|edits) said:

5 June 2011
Question regarding SEP and investing in a privately held company. Self directed IRAs are allowed to invest in privately held companies, LLCs, etc. Several custodians assist with this: Pensco, Equity Trust, Entrust. So my SD-IRA can invest in my friend's LegitimateBusiness LLC, using Pensco as a custodian and following all their applicable rules. Whether or not this is a good investment for my SD-IRA depends on the success or failure of LegitimateBusiness LLC.

But a client is telling me it's acceptable to for the owner of an LLC or an S-corp to invest in the company with his or her own self directed IRA. For example, Stan Client is the sole owner of Stan's S-Corp. He also funded Stan's Self Directed IRA. So can Stan issue stock from the Stan's S-Corp for purchase by Stan's SD-IRA without penalty or tax?

Or can Stan start another S-Corp, say, Stan's Second S-Corp, and issue stock that will be purchased by Stan's SD-IRA? Is that allowable investment for the IRA, that is, one that will not be seen as a premature distribution?

My instincts tell me this is disallowed, but several "alternative lending experts" are saying both scenarios are permissable.

LH2004 (talk|edits) said:

June 6, 2011
There are specific prohibited transaction exceptions for qualified plans. Search for ROBS.

Anarchrist (talk|edits) said:

6 June 2011
S-corps have restrictions as to what can be a shareholder. Don't believe IRAs qualify.

Greenville (talk|edits) said:

7 June 2011
Thanks very much.

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