Disqualified Parties

Disqualified parties refer to parties that are disqualified from participating in a transaction with an IRA. Most Individual retirement accounts are subject to §4975 of the Internal Revenue …

Disqualified parties refer to parties that are disqualified from participating in a transaction with an IRA. Most Individual retirement accounts are subject to §4975 of the Internal Revenue Code but are generally not subject to the requirements of ERISA.

The following parties are considered disqualified per section §4975 of the Internal Revenue Code:

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  • The IRA owner or spouse.
  • The IRA owner’s lineal descendants (children and grandchildren) and ascendants (parents and grandparents) – brothers, sisters, nieces nephews, uncles and aunts are ok.
  • Any entity (corporation, estate, partnership) that has a combined ownership greater than 50% by a combination of all disqualified parties.
  • A 10% owner, officer, director or highly compensated employee of such an entity.
  • A fiduciary of the IRA or person providing services to the IRA (custodian or trustee).

Sources:
http://www.whitecase.com/publications/detail.aspx?publication=884

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