David Crane is 45 years old and single. He graduated with a business degree from North University in 1995. He lives in New York City. David owns a bar that is minimally successful. He and another party are considering forming a partnership to buy an old building, renovate it, and then move both his bar and the other party's restaurant into it. David would like to make this investment; however, he needs approximately $400,000 for his share of the buy-in of the partnership that will purchase, renovate, and manage the building. David's only large liquid asset is his self-directed IRA, which currently owns $500,000 in stocks and bonds. David proposes that he direct the IRA to sell the securities and to use the proceeds to invest in the building renovation partnership.

What is the specific tax issue in this case? And which IRC section can be used to apply for this case?