Scenario:

Investment property owned by several owners (all related). There is very little equity in the property. One of the owners (owner A) wants to keep the property and the rest want out. For some reason the property cannot be refinanced to cash everyone out and leave the last remaining owner A with the property and a mortgage payment–this is not an option. Nor does owner A (who wants the property) have any cash to pay off the note.

One of the other owners (owner B) has decided he wants to do owner A a favor and open up a self-directed IRA, and purchase the house in his IRA and paying off the note leaving owner B as the sole owner of the investment property.

The question is, could at some point down the road, owner B sell the property back to owner A (assuming owner A comes up with the cash or obtains a mortgage), with owner B receiving cash for the transaction into his IRA and then later transfer the cash as a rollover back to a traditional IRA and invest once again in stocks and bonds.

To further complicate the situation, the property happens to be financed by one of the other owners (owner C) who is currently carrying the note.

Obviously lots of concerns in a scenario like this–for example is this “self-dealing”? Also, my understanding is you can’t purchase real estate you already own in to a self-directed IRA. Being that owner B is a part owner, would he be purchasing property he already owns since he is a part owner? And would any of the actions named above make for a taxable distribution of the funds?

I realize this is a complicated situation, but any input or perspective is greatly appreciated.