Prohibited Transaction?

[chris]

Client is a 50% general partner and a 51% limited partner in a limited partnership which has as its sole purpose to purchase, hold, sell, etc... any and all types of business investments. Client wants bank who is custodian on client's IRA to invest $X from client's IRA in the limited partnership. The transfer would fall under 4975©(1)(D) but the issue is whether or not the limited partnership is a disqualified person. Clearly the 50% or more limit of 4975(e)(2)(G) is met, but would the fact that the limited partnership has no employees cause it to fail 4975(e)(2)©? Also, IRC 408(e)(2) provides that an IRA will lose its qualified status if the IRA owner engages in a 4975 prohibited transaction with respect to the IRA. 408(e)(2) provides that the person for whose benefit the IRA was established will be treated as the creator of the IRA. Does anyone have any comments as to the application of 408(e)(2)? It appears to me that the only thing that might possibly prevent the application of 4975 is the fact that the limited partnership does not have any employees. Possibly the IRS could deem client to be an "employee" of the limited partnership, in which case 4975(e)(2)© would be satisfied? Can anyone help me out on this?? Thanks....

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[This message has been edited by chris (edited 01-14-2000).]

[Guest Cindy]

Once I convert my traditional IRA to a ROTH IRA can I make regular contributions to it?

[John G]

Cindy, normally you want to start a new question then tack a Q on another thread.... but the simple answer to your question is YES. A year back this was an area of confusion due to how the rules were written, but that has been cleaned up. Most custodians now recognize you don't need separate accounts. If yours does not, go up the chain of command or take your funds to another custodian who is more on the ball.