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Prohibited Transactions

When a transaction occurs between a retirement plan and a Disqualified Person this generates a prohibited transaction. Such prohibited transaction are a violation of IRS rules, and result in severe tax penalties.

A prohibited transaction occurs when there is any direct or indirect:

  • Sale or exchange, or leasing, of any property between a plan and a disqualified person;
  • Lending of money or other extension of credit between a plan and a disqualified person;
  • Furnishing of goods, services, or facilities between a plan and a disqualified person
  • Transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a plan;
  • Act by a disqualified person who is a fiduciary whereby he deals with the income or assets of a plan in his own interest or for his own account; or
  • Receipt of any consideration for his own personal account by any disqualified person who is a fiduciary from any party dealing with the plan in connection with a transaction involving the income or assets of the plan.
Reference IRC 4975