Any stocks prohibited in self directed IRA?

Limitations on trading depend on your brokerage house. My brokerage makes some comments on my portfolio.

A brokerage will look a little at your investing practices to keep things from getting too weird.

ETFs and stocks that trade on the major exchanges shouldn't be a problem. Or covered calls should also be OK. Buying calls might be perceived as being too risky for some brokerages. But selling uncovered calls are unlikely to be allowed.

-- Ron

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I think those are ok, and even better in IRA so you don't hit those special tax issues of selling "collectables" or whatever that trap is for precious metal etfs, or also K-1 taxation for commodity etfs structured like a partnership. And best of all you can buy and sell, buy and sell without hitting "wash sale" rules (those do seem pretty sell-worthy now).

Restrictions that I seem to recall is you can't structure something that essentially translates into real estate (altho reits ok) or short anything (altho inverse etfs are ok). Some brokerages seem to have sanity checks on their buying software so it will alert you if not suitable. If I have this wrong, it should rouse some greybeards to respond here...

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I think those are fine.

One should beware of investments, such as Master Limited Partnerships, that produce substantial "unrelated business taxable income", in an IRA, which can be taxed when it exceeds a certain threshold, I believe $1000. You can Google "unrelated business taxable income IRA".

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Thanks all for the advice, especially the above. This appears to be crucial information to anyone taking distributions from an IRA under section 72(t), as it can materially change the balance and thus subject the account to full tax and penalties.

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HH- I posted something a couple days ago, but it didn't seem to go through...you should verify that the specific investment you plan to buy is OK for tax purposes. You mentioned a gold ETF I believe and there was a private letter ruling about a couple of those last year. A "PLR" is IRS guidance regarding a specific set of facts and has limited applicability beyond those facts, but tax geeks look to them to see what the IRS says about narrow issues.

Anyway -- in addition to UBTI (which can come up with a number of different securities that look like "stocks") there's also the prohibition on owning "collectibles" in an IRA, including precious metals if held a certain way. The PLR was requested by one of the gold/silver ETF providers. The IRS stated that the ETF in question would be acceptable, that it wouldn't violate the prohibition on collectibles.

I would suggest asking for similar guidance from a product provider because if you fail the "collectibles" prohibition, the purchase is considered a distribution of the amount invested.

-Tad

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