Interacting with your IRA is considered a prohibited transaction. So, unrelated,
self directed IRA owners will attempt to enter into a reciprocal agreement to
loan each others self directed IRA money so that the IRA owners can indirectly
tap their funds for personal use.
This is a flawed design and approach. Even though the parties are not automatically on the disqualified list for prohibited transactions, the indirect benefit rule would come into play.
As a self directed IRA owner, you are not allowed to receive any benefit directly or indirectly from your IRA. The entering into a reciprocal arrangement with a third party which results in monies into your own pocket (i.e. the other person’s IRA funds) clearly conveys an indirect personal benefit to you.
To learn more about self directed IRAs go to:
www.nafep.com