My game plan was to rollover my 401k to a checkbook IRA LLC. But the mortgage company wanted to close fast on a short sale before I could set up the LLC, so I had to rollover my 401k to a traditional IRA and take a distribution (and pay taxes & penalties) for the downpayment. Now I own the property but have to pay off the loan in 12 months. My plan is to set up the LLC & pay off the balance (as well as rehab expenses) through the LLC. But I know I can't do business with myself. Is it possible for me to transfer title in the house to a friend's LLC, and then have my LLC buy it back 6 months from now? Anybody know if this is legal, or of another means of getting ownership of the property to my LLC instead of myself? Obviously I can't continue tapping my IRA for distributions and paying taxes & penalties each time.

@Tom States  

what you're describing is indirect prohibited transaction, which is illegal. 

@Tom States  

Dimitri is correct. I would chip in by stating that there is absolutely 100% no way you can salvage this transaction with IRA funds in your name. Any workaround that you may possibly come up will result in a prohibited transaction. The fact that you are currently on title in your own name makes this property toxic poison to your IRA.

Time to start working on a different exit strategy and see if you can find a way to dish this property off to another investor.

Sorry.

@Tom States , I would recommend that you consider NOT setting up a check book llc but instead use a Trust Company like Equity Trust since you do not have the demonstrated discipline to slow down enough to "follow the rules". Need not jeopardize the rest of your IRA with haphazard decisions. You will not be able to Rush into a Prohibited Transaction while using Eq. Trust since you must submit to them your "direction of investment" and all docs several days in advance of funding for examination (not deal approval -that is up to you), even for the initial down payment. Keeps you out of trouble. You cannot co mingle your existing investment with your SDIRA now. Salvage the current deal with personal funds and move on.