When is a Person a Disqualified Person? 24%? 49%? of Stock in IRA

[Guest wdallas]

I have a client who is 45 years old and has 4% of a company's stock in his IRA. He also owns another 20% outright (so a total of 24%). I am concerned that the prohibited transaction/disqualified peson rules may apply. I seem to recall that under 20% was fine; 20-25% was a problem; and over 25% triggered the penalties. But after review of the statute and a helpful listing in the Benefits Link, I note that a person is not a disqualified person if he owns less than 50% of the entity under 4975(e)(2).

Is there a prohibited tranaction or disqualified person problem?

Can this client purchase other stock as long as he is under 50%?

[Appleby]

See the applicable Code Section at http://assembler.law.cornell.edu/uscode/ht...75----000-.html.

For transactions such as these, you may want to consult with an ERISA or tax attorney

[Guest JBeck]

It not so simple to state that if an IRA holder's ownership is under 50 percent that an investment in employer stock is OK. The DOL will not provide an opinion letter on the self dealing aspects of the prohibited transaction rules, so a small amount of ownership is generally not risky, but not too much guidance after that.