Self-Directed IRA and Self Dealing

[Tanner Gish]

Hey Friends,

  There is probably some seminole BP thread that asnwers this already, but I haven't found it yet.

My account just put a damper on my plans to fund a Self Directed IRA this month with a 2015 max contribution, and a 2016 max contribution in early Jan, and to take those $13,000 to invest in a flip project I'm working on. I was told my plan has two shortcomings:

1) You cannot use proceeds from a self directed IRA to finance (purchase or rehab) any part of a deal you manage (even it the property is owned by an LLC, I still own the LLC)- this is "Self-dealing." True?

2) You cannot do this, and let's say, this $13k was all that was needed for rehab (let's say property was purchased with another loan) as equity ownership in the property, and after the flip, the profit share for that borrowed $13k was, say, $20 k (a 153% return), that this also not allowed- the rate of return cannot exceed what typical equity market return would be. I find this "counsel" I received pretty unbelievable, as I'm pretty sure Uncle Sam won't stop you from making this kind of return had you bought Netflix stock with your IRA years ago and made that kind of return.

  Humbly looking for your wisdom and advice. Thanks!

-Tanner