Ezel / IRS Rulings / 201014064

CCA 201014064: IRS discusses IRA-owned LLC sale proceeds

Number
201014064
Outcome
Advice
Document type
Chief Counsel Advice
IRS subject
Prohibited Transaction
Topics
Excise taxes
Code sections
§ 4975
Ruling dated
March 9, 2010
Publicly released
April 9, 2010
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 2010, 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 2010
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 discusses whether an IRA owner’s receipt of proceeds from the sale of an investment held by an IRA-owned LLC could create a prohibited transaction. The advice refers to section 4975(c)(1)(E), which addresses direct or indirect dealings by a plan owner with plan assets for personal use. It suggests that the custodian should issue Form 1099-R to report a distribution to the IRA owner and states that failure to do so could indicate a prohibited transaction. The advice also notes a possible factual question about whether the custodian actually managed the IRA account.

Ruling snapshot

  • Question: Could an IRA owner’s receipt of sale proceeds from an IRA-owned LLC create a prohibited transaction?
  • Outcome: Advice given
  • Key authorities: IRC § 4975(c)(1)(E)

Full text (IRS public release)

ID: CCA_2010030909372450 Number: 201014064
Release Date: 4/9/2010
Office: -------------------------
UILC: 4975.03-00

From: --------------------
Sent: Tuesday, March 09, 2010 9:37:28 AM
To: -----------------
Cc: -------------------------------------------------------------------------------------------------- Subject: RE: IRA Question - Prohibited Transaction

This kind of scenario is the reason why I think that there needs to a tightening of the custodian provisions. An IRA owner should not be receiving the proceeds from the sale of the investment of the IRA owned LLC. This is the intent of section 4975(c)(1)(E) of the Internal Revenue Code, to not allow the IRA owner to be able to deal indirectly or directly with assets of the plan for her own personal use. If we are not going to allow compensation to be paid directly to the IRA owner, why would we allow a distribution of sale proceeds of the LLC owned by the IRA to the IRA owner? My feeling is that at the very least a 1099- R must be issued to the IRA owner by the custodian of the IRA account indicating a distribution from the IRA, if not then I would say you have a PT. Also, based on when the 1099-R is issued could also raise a factual question as to whether the custodian really has management of the IRA account and whether the custodian is just a figure head.

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