Legal Question in Tax Law in Michigan

Purchasing a business with my IRA contributions

Can I purchase an existing business (ie. an established Bed and Breakfast Inn) with my SEP/IRA contributions without accruing any tax penalties or federal income tax liabilities? Does the business have to be Incorporated to do this? Do the laws vary state to state?


Asked on 1/22/01, 9:55 pm

1 Answer from Attorneys
Erik Stamell Siegel, Greenfield, Hayes & Gross

Re: Purchasing a business with my IRA contributions

As a general rule you cannot use IRA funds to purchase the existing business without generating tax liability, however by forming a company, transfering your IRA into a company plan and then taking a loan from the company plan you can borrow the money tax free. This would obviously take a few more steps, but you do get the desired result.

The business does not need to be incorporated to purchase it, and the laws do not vary from state to state because the applicable laws are Federal.

Our office does a great deal of work like this and we would be happy to assist you for a very reasonable fee. Please feel free to contact me at 248-263-3514. Erik Stamell

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Answered on 2/15/01, 8:55 am


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