Real estate held in an IRA
Client asks to use cash in IRA to pay off mortgage and hold current residence in IRA. Current residence no longer will be principal residence since client is moving from IL to CA and will acquire a new principal residence.
My initial response is NO-prohibited transaction, i.e. selling property to IRA. Comments, please!
Permalink Submitted by mk foss on Wed, 2009-02-25 01:42
Selling an asset to an IRA is a prohibited transaction. Buying an asset from an IRA is a prohibited transaction. Using IRA funds to benefit the owner (by paying off mortgage) is a prohibited transaction. These actions could disqualify the IRA and make it totally taxable.
One must be careful whenever investing in real estate with an IRA because so many things can go wrong, but the proposed scheme has more than the usual hazards.