My client wants to invest in a farm operation that's structured as a limited partnership. His 25% interest will be paid with 12.5% of his personal funds and 12.5% from a self directed IRA. He might also be actually farming this land as opposed to renting it out. Are there any issues with the 12.5% coming out of the IRA?

ANSWER

The BIDaWIZ Team's Answer:

First, you need to make sure that the partnership agreement permits an individual retirement account or a qualified plan to be a partner. Also, you need to ensure that the self-directed IRA owner doesn't have any interest whatsoever in the business. IRC 4975(c)(1)(E) prohibits any "act by a disqualified person who is a fiduciary whereby he deals with the income or assets of a plan in his own interests or for his own account.