Question on equipment leasing with an IRA
I want to use my traditional IRA to buy equipment and have the lessee pay on an amortization schedule directly into my custodial IRA account. Is the interest charged taxable or because it is invested as an IRA, nontaxable until it is withdrawn at age 70-1/2? Thanks for help on this.
Permalink Submitted by mk foss on Tue, 2012-08-21 21:09
There are some serious problems with this idea. Equipment leasing is unrelated business income – so all of the income would bet taxed to the IRA at the compressed rates that apply to trusts. The tax must be paid from the IRA – if the IRA owner pays it, that’s an excess contribution.
If the lessee is the IRA owner or a related party to the IRA owner, the transaction is a prohibited transaction. The penalties for a prohibited transaction could be an excise tax or worst case – disqualification of the IRA.