The Peril In Using IRA Funds To Start A New Business.

In this private ruling from the IRS, the taxpayer sought to use his IRA funds to buy a partnership interest.  The paperwork was prepared and the partnership interest was purchased with the IRA funds, with the result that the IRA held the partnership interest.  However, the advisor that prepared the paperwork failed to realize that the custodian could not hold the partnership interest (while other custodians could), and the IRA custodian reported a distribution by issuing Form 1099-R.  The taxpayer sought relief from the 60-day rollover provision based on the bad advice received.  The IRS denied relief on the basis that the IRA funds were used to start a business venture rather than being rolled-over exclusively for retirement purposes.  Thus, a taxable distribution occurred along with any earnings on the distributed amount.  Priv. Ltr. Rul. 201547010 (Aug. 26, 2015).