Combining funds from LLC and IRA to invest in a syndication?

[Tyler Speelman]

Hey BP,

Can you combine funds from self-directed IRA, and LLC to invest in a syndication as a limited partner?

Thanks in advance!

[Brian Eastman]

@Tyler Speelman

@Chris Seveney has summed it up nicely.

The internet will tell you yes.  A professional will tell you maybe, but probably best not to go there.

IRS rules prohibit any direct or indirect benefit between a plan and a disqualified person.  You are #1 on that list, which also includes lineal family, family owned businesses/entities, and certain fiduciaries or business partners.

If you can invest at or above the minimum in a syndication and separately your plan can also invest on its own at a threshold above the investment sponsor's minimum, then those are clearly two separate investments and there should be no issue.   

If, however, you need to pool the resources to meet the sponsor's minimum, you are now creating a benefit by enabling one or both parties to participate in an investment they could not otherwise through access to funds belonging to a disqualified person.  The IRS could determine that is a self-dealing prohibited transaction and the entire IRA would be deemed distributed and taxable.