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Who are Disqualified Persons?

Following are those considered Disqualified Persons to an IRA or 401(k) retirement plan.  Any transaction, co-mingling of funds, extension of credit, or any other direct or indirect provision of benefit between a plan and a disqualified person can result in a Prohibited Transaction and severe tax consequences.

  • The IRA owner
  • The IRA owner’s spouse
  • Ancestors (Mom, Dad, Grandparents)
  • Lineal Descendents (daughters, sons, grandchildren)
  • Spouses of Lineal Descendents (son or daughter-in-law)
  • Investment advisors
  • Fiduciaries – those providing services to the plan
  • Any business entity i.e., LLC, Corp, Trust or Partnership in which any of the disqualified persons mentioned above has control.  Control is defined as either 50% or greater ownership or an executive day-to-day decision making role.

Reference: IRC 4975