IRAs can be an important part of estate planning, especially for savvy investors and business owners. But be careful – mixing your IRA and your business interests too closely can cause big tax problems.

The IRS can “revoke” an IRA, and deny you all its tax benefits, if you use the funds for certain improper purposes. This rule applies not only to you, but also to actions by your family members and any business or trust that is controlled by you or your family.

What can’t you do? You can’t buy, sell, or lease property to or from an IRA; you can’t borrow money from an IRA or lend money to it; and you can’t make personal use of IRA property.

So, for instance, you can’t invest IRA funds in a business you own, you can’t lend money from an IRA to a relative to start a business, and you can’t use real estate owned by an IRA (such as rental property) for personal purposes (such as a vacation).

In fact, if your IRA owns rental property, you should avoid making any repairs or improvements yourself, because the value of your labor might be considered an improper contribution.

Two Colorado business partners found this out the hard way recently.

The two each used about $300,000 in their IRAs to buy 50% shares in a new corporation. The corporation then used the funds, plus a bank loan and a promissory note personally guaranteed by the partners, to buy a fire-safety company.

Oops! The personal guarantees meant that the partners were indirectly lending money to the IRA. As a result, the IRS revoked the IRA, and it charged the partners more than $500,000 in taxes and penalties.

If you’re considering putting IRA funds into “alternative” investments such as real estate, art, or shares in a private business, be careful and consult an expert first.