What is Section 4975 of the Code?
Section 4975(c)(1)(D)2 defines a prohibited transaction to include any direct or indirect transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a plan.
Who is a disqualified person under 4975?
The term “disqualified person” is defined in Section 4975(e)(2) and includes (but is not limited to): the IRA account holder; the account holder’s spouse, lineal descendants (e.g. children, grandchildren), lineal ascendants (e.g. parents, grandparents), and spouses of those people; business entities owned 50% or more …
What is a prohibited transaction?
Prohibited transactions are certain transactions between a retirement plan and a disqualified person. If you are a disqualified person who takes part in a prohibited transaction, you must pay a tax. These frequently asked questions and answers provide general information and should not be cited as legal authority.
What is a disqualified person?
A disqualified person is any person who was in a position to exercise substantial influence over the affairs of the applicable tax-exempt organization at any time during the lookback period. It is not necessary that the person actually exercise substantial influence, only that the person be in a position to do so.
Is an ex spouse a disqualified person?
Disqualified Persons & Transactions A disqualified person is one whom your IRA cannot do business with. These people include yourself and all lineal ascendants and descendants such as your spouse, your children, your grandchildren, your parents, and your grandparents.
What are ERISA prohibited transactions?
Prohibited transactions are conflicts of interest that violate ERISA. Plan sponsors and fiduciaries are required to identify and evaluate. conflicts of interest and protect the Plan and its participants from the consequences of those conflicts.
What is a disqualified person for a prohibited transaction?
A prohibited transaction is a transaction between a plan and a disqualified person that is prohibited by law, or improper use of the retirement account by any disqualified person. Prohibited transactions can cause penalties and can even result in the disqualification of your IRA.