Can I sell a house in my Self Directed IRA to ex(2 kids with her)

3 Replies

My wife and I have been divorced for eight years.  We have two college aged children whom she still claims as Dependents on her income tax return.  I have a house in my Traditional SDIRA.  Can I sell her this house, or is she considered a disqualified person because of my children being her dependents and living with her when they are not at college?

@Don Blevins  

Don,

The rules state your wife is a disqualified person but she is not your wife so it seems it would be ok. However what @Dmitriy Fomichenko is asking is key. Are you "personally" getting a benefit from selling the IRA owned house to your exwife? I believe if the kids are living there it would be considered a personal benefit to you, a reduction in alimony, etc. would make it a prohibited transaction. The burden of proof will be on you to prove you did not or will not have a personal benefit. I believe it will be legally tough to do with your kids involved. I'm not sure of the answers to the questions asked above but before you do anything check with a tax attorney and/or accountant. Penalty can be severe based on the circumstances.

You may also ask the IRS for a prohibited transaction exemption PTE that would permit your Ira to sell the house to the ex-wife. This requires time and fees. Good luck. .