Posted over 10 years ago

ROBS 401k Prohibited Transaction

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QUESTION:

I have and Equity Trust self-directed IRA and have been told by others that I can set up a C-corp and put my 401k funds into it as a stock investment and then use the proceeds to buy a B&B and run it while living in it. Is this true and not self-dealing?

I assume I would set up a a self-directed IRA LLC first to make the investment in the C-Corp that buys the B&B building/business.

Once the IRA invests in the C-Corp can others including my own non-IRA funding buy stock in it to supplement the IRA in purchasing the business?

ANSWER:

You have been grossly misled. While it is true that IRA and/or former employer retirement funds such as 401k,401a, 403b and 457b funds can be transferred to a rollover business start up (ROBS) 401k and then invested in a C-corporation that offers good or services, no the IRS retirement rules do not allow for the ROBS 401k owner to use the property owned by the ROBS 401k C-Corporation for personal use; simply stated, doing such would result in a 401k prohibited transaction!

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