In a perfect world, there would be no income taxes, but that’s another conversation.

In our real world, one can choose to protest/challenge taxes or to aim to be compliant as to avoid being kidnapped by the government.

This blog is obviously about the latter. That said, the only precedent is DOL AO 2000-10A which says the prohibited transaction rules D&E trump all other rules and potential loopholes.

I was good friends with the attorney who requested that advisory opinion and I also regularly communicate with the DOL agents who wrote the opinion. It’s pretty darn clear. ROBS = not compliant.

A good friend of mine is being sold a franchise and informed me of this really great way to fund his own franchise with his franchise’s new 401k . At first I thought , A loan is acceptable at a max of 50k, then he said it wasn’t a loan.

Now after observing this strategy being hyped by Franchisors and vendors who are trying to find money as they are selling people franchises, I see a nice sized lawsuit on the horizon.

I cant see anyway this deal will turn out good. If this is allowed every business owner will be able to use their own plans retirement assets at any time to satisfy any type of cash flow issue for their company.

What a great precedent!
We could pay a majority of earnings, not as compensation to the woner but to the plan as the shareholder through dividends then turn around and repurchases additional shares of the company through the plans new liquid assets and thus completey avoiding all taxation of income while using all proceeds at 100% of non taxed value to grow the business. This is now avaiable based on the ROBS concept.

as a kicker,
Then the plan participant, the owner transfers the stock, at age 591/2 at a basis (assume for this example) 200k to a roth IRA. We take the tax hit of 200k in a year we show no other income, since all of the potential income is paying the Shareholder”401k plan” as dividends.
Then we sell the business for 5 times net 200k, for a million and get the whole gain tax free after 59 1/2.

sign me up!!!!!!!!!!

This is a 3 part post. Make sure you read all 3 parts, as the answers are within them.

Jeff