SERIES I BOND INTEREST TAX IMPLICATIONS FOR CHECKBOOK IRA/LLC
I recently set up a Self Directed Roth IRA and purchased about $2.5k of Series I Savings Bonds with an Checkbook IRA/LLC.
My questions are:
1. Is this a Prohibited Transaction? If yes, what are the penalties? If no, Is my LLC subject to Federal Income Tax on the interest gained on the bonds?
2. Can I defer paying income taxes until after the bond is cashed?
Thank you.
Permalink Submitted by Alan - IRA critic on Tue, 2022-06-28 14:03
Don’t your checks indicate that the the checking account is for your IRA? Treasury Direct will not sell such bonds to an IRA and probably on their records do not show your IRA as the owner, and if you purchased them with other money you could not deposit them in your IRA because all IRA contributions must be made in cash. DId you discuss this with your self directed IRA custodian? Seems like you own these bonds individually, and made a non cash IRA contribution of these bonds which you technically own individually, which is an excess contribution which must be removed with applicable earnings, if any. I don’t know if this is also a prohibited transaction, what does your custodian say? Self directed IRA custodians deal with prohibited transactions every day and should be able to give you more detail including what they will have to report.