Self-Directed IRAs Under IRS Scrutiny: Successfully Clearing the Legal and Tax Minefield

Avoiding Valuation Errors, Prohibited Transactions, and UBTI; Protecting Tax-Deferred Status

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Wednesday, March 18, 2015

Recorded event now available

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Course Materials

This course will provide tax advisors with necessary guidance to help individual clients navigate the very specialized legal and tax rules governing SDIRAs. The panel will review contribution and valuation issues, the rules against self-dealing, and tax implications of UBTI in SDIRAs.


Reacting to the steadily increasing popularity of self-directed IRAs (SDIRAs), the IRS announced changes to Forms 5498 and 1099-R to increase disclosure of these retirement accounts. In modifying the forms, the IRS indicated it would more aggressively scrutinize valuation of the assets placed in these accounts to ensure taxpayers are paying appropriate tax on the accounts.

The IRS also noted that, due to the nature of custodians’ roles in holding the accounts, taxpayers are often unaware of the restrictions particular to SDIRAs. As a result, tax advisors often only become aware of potential negative tax implications of transactions within the account after they have occurred.

Unlike securities held in traditional custodial retirement accounts, most assets placed in SDIRAs often do not have a fixed, ascertainable market value. This creates a host of legal and tax issues, which professional advisors need to be aware of before their clients encounter problems. For example, the characteristics of SDIRA assets often lead to legal and tax issues, such as the IRA owing current tax on investments (i.e., unrelated business taxable income (UBTI) or unrelated debt-financed income (UDFI)), significant risk of “prohibited transactions”, which can completely invalidate the tax-exempt status of the SDIRA, and/or required minimum distribution (RMD) problems.

Listen as our experienced panel details the complexities specific to SDIRAs and provides practical guidance on how to advise taxpayers to maximize the tax advantages of these accounts.



  1. SDIRAs—structures and eligible assets
  2. Valuation requirements and 2015 IRS revisions to Form 5498
  3. Real estate assets in SDIRAs
    1. Real estate held in entities
    2. Avoiding self-dealing transactions
  4. Close-held company stock held in SDIRAs
  5. UBTI and UDFI rules
  6. Potential for current filing and payment requirements


The panel will answer these and other questions:

  • What are the valuation requirements and concerns surrounding non-traditional assets to an SDIRA?
  • What impact does debt encumbrance or other types of income have on current taxability of SDIRAs?
  • What actions and transactions constitute self-dealing or other prohibited transactions?


Warren L. Baker, JD, LLM
Warren L. Baker, JD, LLM

Fairview Law Group

Mr. Baker’s practice is focused on wealth transfer, estate and trust planning and IRA tax compliance.  He...  |  Read More

Jones, James
James A. Jones

The IRAeXchange

Mr. Jones is a licensed financial professional with over 20 years experience in retirement planning and wealth...  |  Read More

Kristen M. Lynch
Kristen M. Lynch

Fowler White Burnett

As a shareholder in the Firm’s Trusts & Estates group, Ms. Lynch focuses her practice on estate planning,...  |  Read More

Elizabeth Trebotich
Elizabeth Trebotich
Growth Equity Group

Ms. Trebotich is a real estate investment and wealth strategist, analyzing emerging and reemerging real estate markets...  |  Read More

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