IRS regulations prohibit IRA investments in life insurance and in collectables such as artwork, rugs, antiques, metals (there are exceptions for certain kinds of bullion), gems, stamps, coins (there are exceptions for certain coins minted by the U.S. Treasury), alcoholic beverages, certain other tangible personal property and S-Corporations.
IRS regulations prohibit transactions that are an improper use of the value in the account or annuity by the account owner, the account owner’s beneficiary, or any other disqualified person. These rules are generally designed to prevent self-dealing. Disqualified persons include your fiduciary and members of your family, such your spouse, ancestor, lineal descendant (e.g. children), and any spouse of a lineal descendant. In addition, other disqualified persons include:
The following are prohibited transactions with an IRA:
If the account owner or beneficiary is engaged in a prohibited transaction, the account is treated as a distribution and all assets will be distributed at their fair market values on the first day of the year in which the transaction occurred. The distribution would be subject to any taxes or penalties associated with an early distribution. Generally, a 10% early withdrawal penalty and treatment of the distribution as ordinary income for the purposes of income taxes may be levied.
Examples of self-dealing include: