Providing insurance to someone, but you own the mortgage ...

[Joe Robinson]

Here's a question for my fellow SEP IRA/solo 401k gurus. Assume it's a IRA LLC (a checkbook control IRA). Any opinions would be appreciated..

- Someone cannot take a management fee, for managing a rental that is owned by their IRA LLC. That's a prohibited transaction, without a doubt.

- But ... would you guys say this is a prohibited transaction? What if your IRA LLC owner finances a house to a 3rd party, and get payments every month. This not a contract for deed, or lease to own scenario, but the house is **100% in the name of the 3rd party owner** ... the IRA LLC just has a mortgage on it. AND...as a day job you the IRA LLC owner is an insurance agent, and the 3rd party who is owner financing the house from you requests that you provide them insurance. The payment will go directly from the 3rd party (owner financing person) -> to the insurance company -> and totally bypass the IRA LLC owner and/or his insurance agency. *But*, the insurance company will pay the IRA LLC owner a 15% commission on the insurance policy!!!

MORE NOTES -> The IRS is very clear - see https://www.irs.gov/irm/part4/irm_04-072-011 - a person cannot provide a service or facility to his retirement plan (the IRA LLC). But... what is stopping me from washing the windows once a month of that 3rd party, on the house I owner financed, for $100 a month? That has nothing to do with my IRA LLC, is clearly not a service for the IRA LLC, and I'm making $100 a month washing windows. I am providing a service or facility to the 3rd party owner, not the IRA LLC. But what if I provide insurance to that house ... what do you guys think??? The only catch is - the IRA LLC is named as a loss payee / mortgagee on the insurance documents - so I think that could be a red flag in an audit. But again, in the window washing scenario, I'm providing a service to the owner. Not the IRA LLC.

Any opinions??