You can always use self-directed IRA accounts of investors as a source for financing. Owners of self-directed plans can make investments in private companies. However, there are certain disqualified persons who cannot engage in prohibited transactions with the IRA. Common occurrences of IRA prohibited transactions are (1) purchasing investments that will benefit the IRA holder (as opposed to the IRA itself) and (2) using the IRA as security for a loan. An example of the direct benefit example is having the IRA purchase a vacation home for your family. Disqualified persons include the IRA holder, his or her spouse, ancestors and lineal descendants of the IRA holder and spouse, and any corporation, partnership, trust, or estate in which the IRA holder has a 50% or greater interest. In calculating the percentage ownership of the IRA holder, the IRA attribution rules apply so that the interest of spouses, ancestors and lineal descendants are included. In some circumstances, investors can utilize their 401(k) plans to invest in private companies.
Consult with a tax professional before making any investments from retirement accounts. If your investor is having trouble convincing your custodian to make an investment with their retirement account, you can set up a new self-directed account with a company like Trust Administration Services Corporation (Www. trustlynk. com) that specializes in self-directed retirement funds. Other sources for self-directed plans are Www. lincontrust. com and Www. pensco. com.