QUESTION: Can I open a self-directed IRA LLC with your company and then take a loan from it?
Lynn O. in Washington
ANSWER: Good question, but no the IRA rules including the self-directed IRA rules do not allow the IRA owner to borrow from his or her IRA, even a self-Directed IRA owned LLC. The consequence of the IRA owner or any disqualified party (e.g., the IRA owner’s spouse, parents, daughter, son and grandparents, to name a few) borrowing / taking a loan from any type of IRA will disqualify the IRA, resulting in treating the entire IRA as being distributed and included in the IRA owner’s income for the year.
However, loans are permitted from qualified plans such as a solo 401k, a type of retirement plan for the self-employed with no full-time employees and that falls under section 401(a). Click here to learn more about the solo 401k loan.