You've been warned: A recent ruling by the U.S. Tax Court holds a costly reminder about the consequences of making inappropriate transactions within a client's IRA.
In a case that centered on two investors' relationship to a company held by their retirement accounts, the court ruled that two business partners' IRAs were disqualified under the prohibited transaction rules when they guaranteed loans to a company owned by their IRAs. As a result, when the stock of the company was later sold inside their disqualified Roth IRAs, they owed taxes on the capital gain.
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