Can my IRA lend money to my business partner for OUR real estate deals?

9 Replies

Would this be considered "self dealing"? I lend him the cash from my IRA. He uses that cash to invest in our deals. To me it seems like it is two separate transactions independent of each other, however I just want to make sure...

I've tried looking and I can't find an answer anywhere....

I am NOT an expert, but it would seem to me to be treading very close to a prohibited transaction.  Is it worth the risk of having your entire SDIRA  disallowed? 

Google for "real estate IRA Prohibited Transactions". Per my understanding no, you cannot do that.

I agree with above that you cannot do that with the SDIRA.

I think the best way to get a similar outcome is to lend to each other out of your ira's but NOT on the title.

A solo 401k might have some features worth looking into as well.

For sure please seek legal and tax advice for acting.   @Dmitriy Fomichenko

 is a great resource.

It could be a non-secured loan for all I care. I just don't know if it could be considered co-mingled/prohibited

@Jordan Williamson  

While an indirect transaction, yes it would be a prohibited transaction because you would ultimately benefit from the IRA transaction in a roundabout way.

@Jordan Williamson

You could not do that. The funds would indirectly be providing a benefit to you, which is prohibited.  It is likely that even the initial transaction may be a disqualified party transaction if you have existing joint ventures with this individual.  IRC section 4975 outlines disqualified parties and prohibited transactions.

@Douglas Dowell

 A quid-pro-quo lending arrangement such as you suggest would also be a prohibited transaction if the IRS were to see that - which if they audited either individual they most likely would.

It is best when working with IRA funds to avoid any situation where you are thinking "it sure would be nice if I could use IRA funds for this deal I'm involved in". The IRA needs to be invested entirely at arm's length. Such investments can be a powerful way to grow your IRA, but your IRA is not a funding source for your own personal deals.

@Brian Gibbons and @Douglas Dowell , thanks for the shout out!

Jordan, I agree with the above comments that the transaction you are describing is prohibited. There are many legitimate ways to invest and grow our IRA tax-deferred so you should explore other alternatives.

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