Texas attorney Noel C. Ice wrote a very detailed law review type article called “Under What Circumstances Can an IRA Invest in a Business Owned in Part by the IRA Owner and Members of The IRA Owner’s Family?” If you want to get into the nuts and bolts of the law, this article is for you. Here’s some text from the introduction:
“Can an IRA form or invest in a partnership (or other entity) in which the IRA and other disqualified persons have more than a 50% interest in capital or profits without violating the prohibited transaction rules? Maybe, if Swanson
[1] is followed.”
“Can an IRA form or invest in a partnership (or other entity) in which the IRA and other disqualified persons have less than a 50% interest in capital or profits prior to formation, but who have more than a 50% interest in capital or profits after formation, without violating the prohibited transaction rules? Theoretically yes, according to PWBOpL 2000-10A and FSA 200128011.”
“Can an IRA form or invest in a partnership (or other entity) in which the IRA and other disqualified persons have less than a 50% interest in capital or profits without violating the prohibited transaction rules? Probably, but great caution is called for.”
“Is a partnership (or other entity) that is controlled by family members of the IRA owner a disqualified person? Yes, if the IRA is self-directed.”
“Is an IRA trustee or custodian always a fiduciary? Yes”
“Is an IRA owner always a disqualified person? Probably. However, if there is no power to self-direct investments, it is arguable that the IRA owner is not a fiduciary with respect to the IRA, and hence, is not a disqualified person.”