I understand that an IRA can't be held in a margin account, or at least margin can't be used. What I didn't know until recently is that the IRS can declare the entire account distributed if it's in a margin account and taxes assessed accordingly.

My question is what would lead the IRS to do that? Is simply having it in a margin account sufficient or would it only be triggered if margin was actually used? What about trading options spreads, which require a margin account even if margin is never used?

2 Answers 2


You cannot take a loan against your IRA, that would disqualify it. So yes, just mere having a margin against your IRA may lead to disqualifying it.


After doing some more homework, I'm going to add an answer here. Although @littleadv's answer is basically correct, it's incomplete and over simplified.

An IRA cannot be held in a full margin account; that is true. Doing so will lead to the IRS disqualifying the IRA and assessing taxes as if the account had been distributed on the day the IRA was opened.

However, the IRS allows what's known as a limited margin account for IRAs. A limited margin account allows the holder to trade unsettled funds, and to invest in most option spreads that require margin.


Qualified traders, whose accounts are approved for options, have access to some strategies they can use in their IRAs. An investor needs to be approved to trade options, plus have at least an options approval level 2 to trade spreads. When approved, an IRA receives "limited margin," allowing for the trade of certain options spreads. It's important to note that limited margin still doesn't allow for the borrowing of funds in the IRA to execute trades. Instead, limited margin is a term that denotes the ability to use expected cash proceeds from unsettled positions to trade certain options.

So the answer to my question is putting your IRA into a full margin account that allows true margin trades such as selling shares short, and selling naked puts and calls, would be what would trigger the IRS to tax your IRA as if you had distributed it. However, no reputable broker would allow you to do that in the first place. One can hold and trade an IRA in a margin account as long as it's a limited margin account.

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