Stock Trading Account

The Self-Directed IRA Structure has been in use for some 35 years, however, the concept of using anentity owned by an IRA to make an investment was first evaluated by the Tax Court in Swanson V.Commissioner 106 T.C. 76 (1996). In Swanson, the Tax Court, in judgment against the InternalRevenue Service, held that the funding of a new entity by an IRA for self-directing possessions was apermitted transaction http://www.gao.gov/products/GAO-14-878T and not forbidden pursuant toCode Area 4975. In FSA 200128011, the Internal Revenue Service, in offering guidance to IRSagents for functions of carrying out audits, validated the Tax Court's holding in Swanson and heldthat a newly developed entity owned by an Individual Retirement Account and managed by theIndividual Retirement Account owner might make investments using IRA funds without breachingthe restricted transaction guidelines under Internal Earnings Code Section 4975.

When it comes to making Individual Retirement Account financial investments the Internal RevenueService does not state which deals are allowed, however just mentions exactly what kinds oftransactions are prohibited. The IRA forbade deal rules are laid out in Internal Profits Code Sections408 & 4975 and typically involve the prohibition against using IRA funds to purchase life insurance,antiques, or enter into any deal with a "disqualified individual". According to the Internal EarningsCode, a "disqualified individual" is typically specified as the Individual Retirement Account holderand any of his/her lineal descendants or any entity controlled by such person(s).

The following is a summary of the vital cases & viewpoint confirming the legality of the Self-Directed

Individual Retirement Account LLC:

Swanson V. Commissioner 106 T.C. 76 (1996).

The relevant truths of Swanson are as follows:.

1. Mr. Swanson was the sole investor of H & S Swansons' Device Business (Swansons' Device).

Mr. Swanson arranged for the company of Swansons' Worldwide, Inc. (Worldwide). Mr. Swansonlikewise organized for the production of an individual retirement account (IRA # 1).

3. Mr. Swanson directed the custodian of his IRA to carry out a subscription arrangement for 2,500shares of Worldwide original released stock. The shares were subsequently issued to IRA # 1, whichbecame the sole shareholder of Worldwide.

4. Swansons' Tool paid commissions to Worldwide with respect to the sale by Swansons' Device ofexport home. Mr. Swanson, who had been called president of Worldwide, directed, with the IRAcustodian's authorization, that Worldwide pay dividends to Individual Retirement Account # 1.

5. A similar plan was set up with regards to IRA # 2 and a 2nd corporation called Swansons' TradingBusiness.

6. Mr. Swanson received no payment for his services as president and director of Swansons'Worldwide, Inc. and Swansons' Trading Company.

The IRS attacked Mr. Swanson's IRA transactions on 2 levels. The Internal Revenue Service arguedthat the payment of dividends from Worldwide to Individual Retirement Account # 1 was aprohibited deal within the definition of Code Section 4975(c)(1)(E) as an act of self-dealing, where adisqualified person who is a fiduciary deals with the possessions of the strategy in his own interest.Mr. Swanson argued that he engaged in no activities on behalf of Worldwide which benefited himother than as a beneficiary of IRA # 1.