{"id":19697,"date":"2018-06-20T15:00:57","date_gmt":"2018-06-20T19:00:57","guid":{"rendered":"http:\/\/www.escapeartist.com\/?p=19697"},"modified":"2020-06-15T19:32:20","modified_gmt":"2020-06-15T23:32:20","slug":"prohibited-transactions-offshore-iras","status":"publish","type":"post","link":"https:\/\/www.escapeartist.com\/blog\/prohibited-transactions-offshore-iras\/","title":{"rendered":"Prohibited Transactions in Offshore IRAs"},"content":{"rendered":"

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When you set up an offshore IRA LLC, you become responsible for your investments. You are the manager of the LLC and the person who signs the checks or send the wires. In that capacity, you are the one responsible to ensure your IRA follows all the rules. Here is a partial list of the prohibited transactions in offshore IRAs that you need to be aware of. <\/span><\/p>\n

Note that this article on prohibited transactions in offshore IRAs is focused on those managing their own retirement accounts through an <\/span>offshore IRA LLC<\/span><\/a>. When you set up an offshore IRA LLC, you become the manager of that structure and the person responsible for the limited liability company. You step into the shoes of a professional investment advisor. <\/span><\/p>\n

That means you\u2019re to manage the retirement account just as a professional would. You must follow all the same rules and always act in the best interest of the account. You can\u2019t borrow from the account or gain any personal advantage from the investments. You must use the same care as you would expect from a 3rd party advisor. <\/span><\/p>\n

The risk with offshore IRA LLCs is that the manager (you) don’t understand the rules. You might think, hey this is my money\u2026 I can do with it as I see fit. Well, you would be wrong. If you\u2019re going to take your account offshore, you must be ready to put in the time to understand all the rules\u2026 to understand what you\u2019ve gotten yourself into. <\/span><\/p>\n

The alternative is to invest offshore through a self directed account. In this case, your custodian makes the investments and is the person responsible for ensuring you do not engage in a prohibited transaction. <\/span><\/p>\n

Self directed IRAs are suited to those who won\u2019t actively trade their accounts and plan to make 1 to 3 international investments. Offshore IRA LLCs are for those who will trade their accounts, want to control the investments, and\/or will have many international investments. <\/span><\/p>\n

There are three basic categories of rules for offshore IRA LLC transactions. They are 1) prohibited transactions, 2) self-dealing, and 3) conflicts of interest. <\/span><\/p>\n

Violating any of these rules can result in the entire account being cancelled as of the date of the error. That means your entire IRA, and not just the portion invested improperly, would be distributed to you with significant penalties (including early withdrawal penalties). <\/span><\/p>\n

So, without any more adieu, here are some of the prohibited transactions to watch out for in an offshore IRA LLC. <\/span><\/p>\n

Section 4975(c)(1)(A) prohibits the indirect sale, exchange, or leasing of property between an IRA and a \u201cdisqualified person.\u201d<\/span><\/p>\n

The most common disqualified persons are: <\/span><\/p>\n