However, aren't you over-complicating things? If you have the money to buy with cash, then just buy the home and sell it to him on a land contract. Why involve your IRA in it?
If you're trying to recapture $20,000, then do two notes, a first and a second. Make the first for $25,000 or whatever would be necessary for you to then re-sell the note to recoup $20,000 in cash. You'd have to wait maybe 6 months to season that $20,000 note, but that's one way to get the $20,000 back without involving your IRA.
Another way--if you've got enough money in your IRA--is to move your IRA to one of the self-directed administrators out there (if it's not already in one of them). You can then buy the investment property with cash from your IRA. Then you can sell it to your son--all within the IRA--on a land contract.
Bottom line is that it's difficult and often inadvisable to mix IRA and other money...and unsafe, too. You'd probably be better keeping it outside the IRA or all within it.
Again, check with an accountant for further details.
Here are some ways I have seen parents help their children buy a home each has their own plus & minus and should be discussed with the appropriate professional:
1. Lend them the funds ( a deed of trust is recorded, parent acts as a private lender)
2. Sign as a non-occupant co-borrower (FHA loan)
3. Buy the home as an investment, rent to children as a lease option to purchase
I don't see that anyone has mentioned your ability to gift money to your son. Both your wife and you, can gift your son an amount that will more than $20K in a given year. You might want to consider that option in the equation as well. In the end, the simpler your solution the better. I'd check with your CPA, then a lender to get this figured out.
The sale to your son I assume would be a break even to you so there would be no gain to report there and or look to roll into another property via 1031 exchange.
It sounds like you would entertain being the lien holder initially and your son would take title/ownership. If you earn interest on the privately held mortgage I am not sure of a way of avoiding paying taxes on interest earned again your CPA would need to offer the final consult. I have a great CPA if you are in need and if you need help finding this property please let me know how I can better serve your needs.