A 62-year-old man planned to lend his daughter $80,000 directly from his self-directed IRA to cover a cash shortfall in her small business, structuring the loan so interest flowed back to the IRA rather than to a bank. His accountant warned him the transaction would be a prohibited transaction under federal tax rules. Federal tax law defines a group of disqualified persons for IRA purposes, and that list includes lineal descendants such as children and grandchildren. The relationship itself makes the loan prohibited, regardless of the interest rate, the paperwork or everyone's intention to repay. The consequences go beyond a bad investment. If an IRA owner engages in a prohibited transaction, the IRA generally ceases to be an IRA as of January 1 of that tax year, and the account is treated as though all assets were distributed at fair market value on that date. For a substantial traditional IRA, that could trigger a large income tax bill in a single year and permanently end the account's tax-advantaged treatment. The damage is not limited to the $80,000, though if he holds multiple IRAs the loss of status generally applies only to the account involved. He can still help using personal savings or a taxable brokerage account, ideally with a written promissory note, a repayment schedule and an appropriate interest rate. A gift is another route, with the 2026 annual exclusion set at $19,000 per recipient. He has told his daughter he will still help, just not from the retirement account. https://t.co/p0Y9PgWspQ