Tax-qualified pension, savings and retirement plans and individual retirement accounts ("IRAs") are subject to complex prohibited transaction rules under § 4975 of the Internal Revenue Code of 1986, as amended (the "Code" (section references in this article are to the Code, unless indicated otherwise)). A recent United States Tax Court case, Peek v. Comm'r, 140 T.C. No. 12 (May 9, 2013), illustrates the complexity and breadth of these prohibited transaction rules and the draconian consequences visited upon an IRA that violates these rules. In particular, the case illustrates how an indirect prohibited transaction can disqualify a self-directed IRA.
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