Self Directed IRA Questions

[Daniel Decker]

I recently inherited a 401k from my father, and am considering my options of what to do with it.  I'm debating cashing it out (without penalty since it was a death benefit) or rolling it over to a SDIRA.  If I cash it out, I would pay tax on it at my current rate.  Then I would most likely use the cash to purchase rental properties or possibly notes.  If I roll it over into a SDIRA, I would most likely want to invest the same way.  The thing is, it would be nice to have access to the money for whatever I want (I'm looking at buying a primary residence soon).  I would have that access if I cash it out.  If I roll it over, I wouldn't.... or would I?  I've read a lot about how things have to be "kept at arms length" and how I can't benefit now, only in retirement when it comes to SDIRAs.  So here are my questions:  

(1) Could my SDIRA loan money to my business partner, and then I get a loan from my business partner for a similar amount with similar terms?

(2) If I own 50% of an LLC, can my SDIRA loan money to the LLC? What if I own less than 50% of the LLC?

Thanks in advance for all of your answers.

[Brian Eastman]

@Daniel Decker

To answer your specific questions, both would likely create prohibited transactions through self dealing and would not be allowed for an IRA. There can be no direct or indirect benefit between a plan and a disqualified party, and route one is just using the business partner to benefit yourself. The IRS would see through that.

You need to decide if:

You want the money personally - take a distribution

You want to invest that money and grow it tax sheltered - but entirely at arm's length - setup a SDIRA.

You could do both if there is enough money in the account and/or over time, but any time the money will be used for you, it will have to be distributed from the IRA.