On an audit, the IRS would probably rule that this transaction is an early distribution, which would mean that you would be subject to the 10% early distribution penalty (unless you somehow qualify for one of the exceptions to it). Even worse, the IRS could claim that the entire arrangement is not an IRA in the first place, in which case the entire amount in your IRA would suddenly be taxable income. These are dangerous waters. Consult a financial advisor (CPA or if the sums are large enough a lawyer who specializes in these types of situations). Not for the faint at heart.