It was discovered that a self-directed IRA has invested in a collectible that does not meet any of the exceptions in Code Section 408(m), and therefore the IRA is treated as having distributed the cost of the collectible to the IRA owner.
Two questions.
1. In addition to the deemed distribution, does the IRA's investment in the collectible constitute a prohibited transaction, or could a prohibited transaction arise if appropriate steps are not taken?
2. Does the IRA custodian have any duty to ensure that the IRA owner correctly handles the deemed distribution, or have a reporting obligation regarding the deemed distribution?
Any thoughts are welcome. Thanks!
