Self Directed IRA Rules: Transactions Prohibited in a Self-Directed IRA
 The first thing to understand about self-directed IRAs is that they are regulated by exclusive, rather than inclusive, rules. This works to your advantage because the list of what you can’t invest in is so much shorter than what you can invest in.
It’s important to understand what you can’t invest in with a self-directed IRA because if you don’t you can lose the tax-deferred status of your account. This can erase any gains you have earned either by the account being disqualified, or via substantial tax penalties.
Generally, prohibited self-directed IRA prohibitions fall into two categories: Prohibited Transactions and Prohibited Investments. Let’s examine each.
Prohibited IRA Transactions
Prohibited transactions have to do with intent, as in those transactions that run afoul of what the account is intended for, your future retirement. Any action or transaction that can be construed as providing you with immediate financial benefit is not allowed.
Prohibited IRA Transactions include:
Personally borrowing money from the IRA
Selling, leasing or exchanging property to the account
Accepting unreasonable compensation for managing property or assets held by the IRA
Using the account as security for a loan
Granting account fiduciaries to obtain, use or borrow against account assets for their own gain
Transferring plan assets, lending money, or providing good and services to disqualified persons*
*Disqualified Persons: For Plan purposes, disqualified persons is defined as the account holder and his or her spouse, lineal descendants, account fiduciaries, trustees, investment managers and advisers; and any corporate entity in which the account holder has at least a 50 percent ownership. For the complete list, access IRS Section 4975 on our IRS Publications page.
Prohibited IRA Investments
Following is a succinct list of what you cannot invest in with a self-directed IRA. Practically everything else is allowed, which makes for a wide range of investment opportunities.
Collectibles: Art, coins, stamps
S-Corp Stock
Precious Jewels and Metals: Gold, silver, diamonds (however, certain U.S. coins and bullion are allowed).
Insurance Contracts
Other: Rugs, antiques, beverages and other personal property.
See IRS Publication 590 on the IRS Publications page for a complete list of prohibited investments
The IRS does not want to interfere with your investment decisions. These guidelines are simply to ensure that you understand which investments you can’t make, and which liberties you can’t take with account funds.
As long as you follow these few simple rules, you can manage your self directed IRA account the way you see fit – toward the future you envision.
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