There is a set of laws lurking out in the shadows that very few IRA owners are aware of, the prohibited transaction rules.
Under the tax code, if an IRA owner accidentally runs afoul of these prohibited transaction rules, his IRA is considered fully distributed and fully taxable. What are these “prohibited transactions”? Basically any transaction between the IRA owner and the IRA is prohibited. Thus the IRA owner can’t loan their IRA money, buy something from the IRA, or receive any benefit (other than the retirement benefit the IRA is supposed to provide to the owner) from the use of the IRAs assets.
This being the tax code, there are of course exceptions to the prohibited transaction rules. Under something called the Presidential Reorganization Plan No. 4 of 1978, the Department of Labor has the authority to create exemptions from the prohibited transaction rules. For the most part the procedure to request and receive a prohibited transaction exemption has been relatively painless.
Well. . . it looks like that is about to change. On August 30th, the DOL published 49 pages of 10 point type on proposed changes to the prohibited transaction exemption process. 49 pages of 10 point type!