Attorney · New York City / Long Island, NY · Member since 2020 · 597 posts · 248 votes
I can't seem to find the answer to this question in my searches, perhaps someone has some experience or expertise with this question-
Can I use funds from my self-directed IRA for the upfront costs of a syndication in which I'm a sponsor, provided:
the funds go directly from the SDIRA to the syndication LLC, and
my SDIRA gets reimbursed directly from the syndication LLC?
I understand that self-directed IRA money can't be used to invest a syndication if I'm the sponsor because I would be earning money from the syndication - making it an active investment (in violation of IRA rules). There is also the rule that I can't lend myself money from my own IRA. But this is lending money (short term) for a syndication - a separate entity.
I would imagine I might have to charge the syndication LLC interest for this to be permissible under IRS rules?
What you are hoping to accomplish is absolutely not possible.
You and an entity you are forming would both be viewed as disqualified persons to your IRA. Any direct or indirect transaction or provision of benefit between an IRA and a disqualified person voids the IRA entirely.
Attorney · New York City / Long Island, NY · Member since 2020 · 597 posts · 248 votes
5y
I knew about the disqualified persons rule & the rule against using SDIRA $ to invest where I'm the sponsor...but you have to ask anyway because sometimes the answer is surprising. After all, I wouldn't expect the IRS lets people convert a Traditional IRA to a Roth - but it's allowed.
I agree, it doesn't hurt to ask and in fact, it is important to seek guidance if you're unsure. Yes, the answers can be surprising. All of the above responses are correct. This is another example of the general rule that IRA and personal investments do not mix well because of the prohibited transaction regulations.