• The Internal Revenue Service (IRS) gives you broad latitude when choosing where to invest your individual retirement account (IRA) savings. You can use your IRA to purchase securities, like stocks, bonds and CDs; or, you can purchase less conventional assets like real estate or shares in a business start-up. However, the IRS does impose some limitations, called prohibited transactions, that you must abide by, or lose your account's IRA tax-free status.
  
  

Prohibited Transactions

• The IRS defines prohibited transactions as improper use of your IRA funds for you or someone in your family. Prohibited transactions include buying from or selling to your IRA, as well as borrowing from or lending to your account. You cannot use an IRA as collateral on a loan. You may not personally benefit from any assets your IRA owns.
  
  These rules are easy to abide by if you purchase securities with your IRA; most investors need never worry about them. But if you use your IRA to purchase a tangible asset, like real estate, you must be careful. Using the property as your vacation spot is prohibited, as is maintaining it yourself. However, you may rent the property to others, and pay people from your IRA to manage and maintain it.
  
  

IRA Custodians

• The IRS requires you to sign up with a qualified custodian, who is responsible for buying and selling assets for your IRA, tracking profits and losses, and reporting information to you and the IRS. Your custodian is also in charge of making sure you don't run afoul of IRS self-dealing and prohibited-transaction rules. Remember, you do not own the assets inside your IRA: your IRA owns them.
  
  

No Collectibles or Life Insurance Policies

• You cannot use an IRA to purchase collectibles or life insurance policies. The prohibition against life insurance policies is fairly straightforward, but IRS Publication 590 contains a list of things classified as collectibles. These include artwork, stamps and coins, rare rugs, antiques, gems and other types of personal items. Alcoholic beverages, like wines and whiskeys, are also off limits. Purchasing these types of things with an IRA is a prohibited transaction.
  
  

Metals

• Though the IRS does list metal as a prohibited collectible, it allows investors to purchase gold and silver coins issued by the U.S. Treasury, as well as gold, silver, platinum and palladium and bullion. To comply with IRS rules against benefiting personally from tangible assets, a reputable custodian will deposit your metals in a safe-deposit box.