Ezel / IRS Rulings / 200952049

CCA 200952049: Salary paid to an IRA owner is a prohibited transaction

Number
200952049
Outcome
Advice
Document type
Chief Counsel Advice
IRS subject
Prohibited Transaction
Topics
Excise taxes
Code sections
§ 4975
Ruling dated
November 24, 2009
Publicly released
December 25, 2009
Source
View Official PDF

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This page covers legal advice the IRS Office of Chief Counsel wrote for IRS staff, issued in 2009, which can't be cited as precedent. Ask about your situation and see what the current Code and IRS guidance say, with citations.

Currency note: this determination was released in 2009
Statutory amendments, regulation changes, court decisions, or later IRS guidance may have changed the analysis since then. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, threshold, or position mentioned here.
Not precedent. Under 26 U.S.C. § 6110(k)(3), this written determination may not be used or cited as precedent. It is advice from the IRS Office of Chief Counsel to IRS personnel on the facts they presented, and identifying details were redacted by the IRS before release. The official IRS release (linked on this page as a PDF) is the authoritative source.
About this page: The plain-English summary and ruling snapshot below were written by Ezel based on the official IRS release. The full text is the IRS's own document.
View official IRS release (PDF)

Plain-English summary

Chief Counsel Advice addresses whether an IRA owner may receive salary from an entity owned by the IRA. The advice concludes that paying salary to the IRA owner, even indirectly through an IRA-owned LLC, is a prohibited transaction. It explains that the reasonable compensation and reimbursement exception in IRC section 4975(d)(10), and the exception in section 4975(d)(2), do not exempt acts described in section 4975(c)(1)(E) or (F). The advice points to the conflict of interest that arises when an IRA owner can determine the amount of compensation paid to the owner.

Ruling snapshot

  • Question: Is salary paid to an IRA owner, including indirectly by an IRA-owned LLC, a prohibited transaction?
  • Outcome: Advice given
  • Key authorities: IRC §§ 4975(c)(1)(E), 4975(c)(1)(F), 4975(d)(2), and 4975(d)(10); Treas. Reg. § 54.4975-6(a)

Full text (IRS public release)

ID: CCA_2009112409523350 Number: 200952049
Release Date: 12/24/2009
Office: -------------
UILC: 4975.03-00

From: --------------------
Sent: Tuesday, November 24, 2009 9:52:35 AM
To: ------------------------
Cc: ----------------------------------------------
Subject: RE: Salary as PT

Yes you are correct the payment of salary to the IRA owner, even indirectly by an IRA owned LLC, is a prohibited transaction. The feeling is although section 4975(d)(10) provides reasonable compensation
& reimbursement exception, section 4975(d)(10) or section 4975(d)(2) does not contain an exemption for acts described in section 4975(c)(1)(E) (relating to fiduciaries dealing with the income or assets of plans in their own interest or for their own account) or acts described in section 4975(c)(1)(F) (relating to fiduciaries receiving consideration for their own personal account from any party dealing with a plan in connection with a transaction involving the income or assets of the plan). An IRA owner has a conflict of interest when he is in a position of authority, control or responsibility to determine how much compensation to pay himself. See section 54.4975- 6(a) of the regulations.
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