Can my SD IRA and I lend to the same borrower?

7 Replies

I was hoping someone here would know the answer to this, I want to make sure this is not considered a prohibited transaction. Can I lend money from my self-directed IRA to a company and also make a private loan to the same company.

Here are the details. I am looking to lend someone $50K for a rehab project from my SD IRA but I am short about $10K. Can I make them a separate $10k loan from my personal funds? If the loans are paid back separately and the funds are not "co-mingled", would this be considered a prohibited transaction?

From everything I've heard, yes. This is called partnering with your self. As long as appropriate percentages are returned to you and your IRA. However, I am not an expert. Talk to the custodian of your SD IRA to be sure.

Good luck.

From everything I've heard, yes. This is called partnering with your self. As long as appropriate percentages are returned to you and your IRA. However, I am not an expert. Talk to the custodian of your SD IRA to be sure.

Good luck.

BTW I'm assuming the person your lending to is not in your linear family tree. That would be an issue.

No, not family.  That rule I am aware of.

@Daniel Guillermo  

Your logic is spot on about co-mingling funds. As long as the party you're lending to is not a disqualified person/entity, your particular scenario is allowable. You and your IRA funds can invest side-by-side as long as the investments stay independent of one another. You can make separate loans or a single loan. In the event you make a single loan, the lenders (you + iRA) just need to be expressed as separate parties and repaid individually.

Going forward, it's good to know that you have the option to partner with yourself. Had I known this earlier, I could have done a few additional deals myself. The important thing to remember is that all IRS rules apply when your retirement funds are at play. No personal benefit/no, no providing goods/services, etc.

I'm happy to answer additional questions or provide clarification where needed. Good luck!

@Loren Whitney Thanks for the information, it is pretty much in line with what I thought. I just wanted that extra confirmation. I am structuring it as 2 separate loans one with the IRA as the lender and the other with me as the lender.

Thanks

@Gautam Venkatesan  thanks for the mention!

@Daniel Guillermo , while it is possible in certain situations for a person to have his or her SD IRA to partner with a disqualified person, there are many chances he or she can trigger a prohibited transaction while operating the partnership. Be sure to consult with a knowledgeable expert before doing so.

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