My SD 401/IRA as a Client.

[Ralph S.]

Ok, so you can, but you can't. I fully understand (no, I don't).
No, I don't want to vacation in the vacation home my SD IRA owns. Please don't point me to an IRS pub.

That you can't personally benefit from the profits of your SD IRA or SD 401(k) is a pretty clear statement, mentioned many times here in the forums, well, now forum. No skimming, syphoning, comingling. It alone makes (or loses) on the investments, I don't get any. Makes perfect sense and I can live with that. I'm not interested in milking it, want it to grow, so I ask.

Is there a separation between an SD IRA real estate investment and the business income I might derive by providing normal and customary business services to the SD IRA?

Or, would it just appear as an LLC shell game and an attempt to avoid detection?

Let's play What-If:
What if, I'm a broker or agent, disclosure issues aside, do I get a commission when my SD IRA buys and sells?
What if, I'm a contractor (licensed, insured, file a Schedule C, have employees, blah-blah-blah), can I competitively bid, and be awarded the contract to work on my SD IRA owned properties?
What if, I'm licensed and provide Property Management services, can I have a contract and charge a fee to manage my SDIRA owned investment properties?

What sayeth you SD wizards out there? My SD IRA, my client. Sure to get great service, but is it allowed?

[Clint Coons]

Ralph,

This isn't even a grey issue in the tax code. IRC 4975 defines a prohibited transaction as follows:

A “prohibited transaction†is defined in IRC §4975(c)(1) as any direct or indirect:
a. Sale or exchange, or leasing of any property between a plan and disqualified person;
b. Lending of money or other extension of credit between a plan and disqualified person;
c. Furnishing of goods, services, or facilities between a plan and disqualified person;
d. Transfer to, or use by, or for the benefit of, a disqualified person of the income or assets of a plan;
e. Act by a disqualified person who is a fiduciary, whereby he deals with the income or assets of a plan in his own interest or for his own account; or
f. Receipt of any consideration for his own personal account by any disqualified person who is a fiduciary from any party dealing with the plan in connection with a transaction involving the income or assets of the plan.

Unfortunately everything you would like to do with your IRA falls within the definition of a prohibited transaction. Also, using an entity that you own or control either directly or indirectly falls within 4975.

What would you like to do? Do you want to access some of your retirement funds without paying a 10% early withdraw penalty? Give me an idea of your endgame and maybe I can help but the way you mention is not the way to approach a self directed IRA.