501c3 Loan from IRA

Is it possible for someone under age 59 1/2 to loan money to a 501c3 from an IRA and avoid the premature distribution penalty and income tax?



If you were to simply withdraw the funds from your IRA it would be a reportable distribution and the only way to avoid the tax and penalty would be to complete a 60 day rollover (assuming that the distribution is eligible to be rolled over).  If you are trying to use the loan as an investment within the IRA, you would need to find a “self directed IRA” custodian that allows for alternative investments.  From there you really need to have a very deep knowledge of the alternative investment you are looking to pursue as well as a very good understanding of prohibited transaction regulations.  It’s not something that someone completely green on the subject should jump into. The first piece of advice I would offer is to be very aware that an “administrator” is not an IRA Custodian, a “facilitator” is not an IRA Custodian, and if you cannot get a straightforward answer about who your IRA Custodian will be then you are already heading in the wrong direction.



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