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Whether for asset allocation, diversification or simply to improve performance, some individuals are looking beyond mainstream investments for their IRAs. Real estate, limited partnerships and collectibles are gaining in popularity. Investors need to know, however, that the IRS limits the investment classes that may be utilized. Life insurance, S Corporation stock and collectibles such as coins, stamps, vintage wine and fine art typically can't be held within an IRA.
If you purchase an asset that is not allowed under IRS regulations, the purchase value of the asset can be considered a taxable distribution to the account holder. Because the IRS also prohibits potentially self-dealing activities such as buying, selling or leasing property to or from the IRA account, clients should not transfer real estate currently owned by them into their IRA. Additionally, neither clients nor their families should live in a home purchased by the IRA. Likewise, IRS rules are clear that a business owner should not purchase his own private corporation's stock with funds held within his IRA account.
This article originally appeared in The Business Owner Journal, the periodical of choice for owners of small and midsize private businesses. All rights reserved, D.L. Perkins LLC. © 2010.
This publication is intended to provide general information on the subject matters covered. It is sold and distributed with the understanding that neither the publisher nor any distributor or advertiser is engaged in providing legal, tax, insurance, investment or other professional advice. The advice of a qualified professional should be sought before any reader applies a concept presented herein to his or her particular situation or business.
D.L. Perkins, LLC is solely responsible for this content.
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