Own a vacation rental in your IRA? Be aware of this potentially massive tax problem

[Account Closed]

Hey BP gang! 

I wanted to make a post about self-directed IRAs and holding vacation rentals like an Airbnb in them. Self-directed IRAs allow you to invest in real estate, including vacation rentals. Where people can get into trouble is when it comes to "self-dealing". If your vacation rental is used by a family member, EVEN if they paid fair market value for renting out the property. It is considered a prohibited transaction. This can have DISASTROUS consequences for your IRA as the account is deemed immediately disqualified in the year this prohibited transaction occurred. This means the entire IRA amount is deemed distributed, and an early withdrawal penalty of 10% is applied to the ENTIRE amount of the IRA. Dont let this happen to you! Please be aware of the rules!