Quick question reguarding self directed IRA and a home I currently live in….


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.

Quincy’s Response:

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.

Share on Google+