Section 4975 (a) imposes a 15% special tax (the first-level special tax) a. In addition, § 4975 (b) imposes a 100% special tax (the. Second-level special tax (special tax) on a prohibited transaction if that prohibited transaction is prohibited. It was not corrected during the taxable period.
A tax is hereby imposed on every prohibited transaction. The tax rate will be equal to 15 percent of the amount involved with respect to the prohibited transaction for each year (or part of it) of the taxable period. The tax imposed under this subsection shall be paid by any disqualified person participating in the prohibited transaction (except a trustee acting solely as such). In addition, an S corporation cannot be owned by an IRA either, not because it is not allowed under IRA rules, but because IRC Section 1361 (b) (requires all owners of S corporations to be “individuals”) and since an IRA is not simply similar to a grantor trust, but is an entity completely separate from the individual owner of an IRA, you are not an owner of an eligible S corporation, as stated in the Tax Court case of Taproot Administrative Services v.
To ensure that retirement accounts are used “appropriately” to save and invest for the long term. However, Section 408 of the IRC sets some limits on the types of investments that can be held within an IRA. Some of the most important requirements are found in section 4975 of the Internal Revenue Code, which states that the IRA will lose its tax-exempt status if the IRA makes prohibited transactions between the IRA and certain disqualified individuals. Specifically, section 4975 of the IRC stipulates that the owner of an IRA (and any other person responsible for the IRA account) is prohibited from combining the financial interests of the IRA itself with those of its owner or any other related party, since all of these people are considered “disqualified persons”.