The rule applies regardless of payment
This is one of the most persistent misconceptions in self-directed investing. You cannot stay in a plan-owned rental property, even if you pay fair market rent. You cannot use a plan-owned vacation home during the off-season. You cannot park your RV on land owned by your IRA.
The prohibition is not about whether the plan receives fair compensation. It is about the identity of the user. If you are a disqualified person, you cannot use the asset. Full stop. IRC Section 4975(c)(1)(D) applies to any use that benefits a disqualified person, not just free use.
Real estate
Plan-owned real estate must be held at arm's length from you and all other disqualified persons. This means:
- You cannot live in or occupy a plan-owned property, even temporarily
- Your spouse, children, or parents cannot occupy the property
- You cannot store personal belongings on plan-owned land
- A plan-owned vacation property cannot be used by your family, regardless of season or availability
The property must be treated as a purely commercial investment. All tenants must be unrelated parties dealing with the plan at arm's length.
Digital assets
The same principle applies to cryptocurrency and other digital assets held by your plan. Plan-owned Bitcoin is plan property. You cannot use it for personal purchases, transfer it to a personal wallet, or treat it as a source of spending money.
All transactions involving plan-owned digital assets must flow through the plan's accounts and serve the plan's investment purposes.
Plan cash
Cash held by your plan cannot be transferred to a personal account or used to cover personal expenses, even temporarily. All plan funds must remain in plan-titled accounts at all times. The only way to move cash from your plan to yourself is as a reported distribution.
Frequently Asked Questions
Can I rent a plan-owned property to a friend or neighbor at below-market rates?
No. While a friend is not a disqualified person, renting below market rate violates the exclusive benefit rule. The plan must receive fair market rent from all tenants, favorable terms to anyone, related or not, work against the plan's interests.
Can my adult child live in my IRA-owned rental property if they pay market rent?
No. Children are disqualified persons under IRC Section 4975(e)(2), regardless of whether they pay fair market rent. The identity of the tenant controls, not the terms.
Can I hunt or recreate on land owned by my IRA?
No. Personal use of plan-owned land, including hunting, camping, or any other recreational activity, is a prohibited transaction under IRC Section 4975(c)(1)(D). The land is a plan asset and must be used exclusively for investment purposes.