Can property purchases with IRA be financed out of IRA?

[Kristopher Kyzar]

If a property is purchased using a Self-Directed IRA, and is retained as rental property, can that property be financed out of the IRA into the company/owner's name with payback of the funds drawn on the IRA? What rules apply to this case?

[Dmitriy Fomichenko]

Kristopher,

You can not sell or otherwise transfer the property from your self-directed IRA to yourself. The reason for that is because you (or any business you own) are considered to be a "disqualified person" to your IRA. The rules prohibit any transaction between the IRA and disqualified person. 

The only way for you to take the ownership is to distribute the property from your IRA to yourself. This is known as "in-kind distribution". Property would have to be appraised and this would be taxable event. And if you do this prior to normal retirement age penalties would also apply.