A man in Ohio bought a small rental house inside his IRA. Good deal, decent tenant, everything by the book.
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One Saturday the gutter came loose. He owned a ladder. He fixed it himself in twenty minutes and felt like a responsible owner.
That twenty minutes may have cost him his entire IRA.
Not the house. Not the gutter. The account. Because in the world of self-directed IRAs, doing free labor for your own investment is a prohibited transaction, and the penalty is not a fine. It is the IRS treating the whole account as distributed to you on January 1 of that year.
Everywhere else in personal finance, trying harder helps. Here, helping your own account is the thing that breaks it.
Self-directed IRAs are legitimate, genuinely useful, and full of trapdoors that look nothing like trapdoors. Let us walk the floor carefully.