I have a home I live in. I owe 80K and it is worth 140K. Can I establish an self directed IRA , use 80 K of my traditional IRA (currently in smith barney) and pay off the residence and turn it into a rental? I plan to purchase another house with non ira funds and live in that and rent the afore mentioned property. thanks for your comments.
Unfortunately the answer to your question is no, unless of course you simply take a distribution from your IRA, which would cost you taxes and possibly a 10% premature distribution penalty if you’re under age 59 1/2. The prohibited transaction rules do not permit you to benefit personally from your IRA’s investments, except as the beneficiary of your IRA when you take distributions. Therefore, a payment of your personal debt would be a prohibited transaction which would disqualify your entire IRA as of January 1 of the year in which you did the prohibited transaction. Also, the prohibited transaction rules would prohibit you from selling the property you own to your IRA. If I can help with anything else, please don’t hesitate to ask.