@BC – Sounds like you should start a ROBS facilitation company… You’ve got it all figured out!

– Jeff

P.S. To readers who ‘scan’ please understand my comment to BC was tongue-in-cheek

Here’s what you can do with ROBS and then add in the ROTH for fun.

contribute 54,500 tax deductible each year to my plan. Use the money to buy my own stock, each year. Now I have successfully evaded taxation on that money and use it for payroll, trucks, company boondoggles, whatever. doesn’t really matter what I use it for at this point it is outside of the Plan and it is 54,500 worth of Cash not 30k after taxes.

Assume the I make 300k and save 25k a year in taxes by doing ROBS. That’s 250k in extra operating capital gratis of the US government.

Jeff,
Isn’t all of this completely reasonable based on the assumption that ROBS is allowable? I mean if ROBS is legit then I could do this every year with my contributions correct?

No chance in hell this will ever make it. This is the worst example of a non sense approach to tax avoidance I have heard.

now for the fun part

10 years later devalue the stock and convert into a Roth IRA with very little tax consequence, run the firm another 2 or 3 years and sell it for a much higher value than at the time of the Roth conversion.

I just avoided an additional chunk of taxes by transferring the stock to a Roth and selling without any tax obligations at liquidation.

Honestly, a firm with an aggressive enough owner who would do a ROBS , and obviously with poor legal counsel would likely concoct any kind of value for a small service company prior to converting to a Roth.

Jeff,

Isn’t all of this completely reasonable based on the assumption that ROBS is allowable?

You clearly have some interesting viewpoints which I respect.

It seems we’ve bound ourselves to a culture and government that has defined legitimate businesses as one that makes money using other people’s money.

For US based corporations to remain globally competitive the 401K retirement as an alternative to “costly” pensions (costly to whom?) was driven by corporate interests which depend on well trained, guarded labor pools.

The 401K quickly shifted corporate earned money to public earned money. Since this new and significant source of other peoples money (US taxpayers) was established, a new and “legitimate” industry was enabled.

The investing public (no longer the sophisicated corporations with all the leverage) put its “trust” in the legitimate organizations positioned to invest for their long-term benefit.

What we’ve seen since the inception of the 401K is a shark fest. Now the “public” would like to say – ‘you know what … I think I want to invest for my own benefit, retirement, and perhaps even help others’.

And guess what’s driven this shift in thinking … ROBS promoters? No, they are simply and creatively (as necessity is the mother of invention) responding to a growing shift in market need – unfortunately, doing something with other peoples money leads to potential abuse.

My imagination is healthy enough to presume that the public at large indeed wants to help itself and others to help themselves. There’s no blame to be given to trustee that acts in the best interest of the poor sole that’s working toward a safe and healthy retirement.

The public has indeed had their hands tied behind their back … and they are now using trying, or at least considering, the use of head and feet to create a safe retirement. Which public (government) or private entity is now going to tie these?

I must say the risks of enabling the labor pool (taxpayers) to invest in one’s own business is not without potential social penalty – but let’s consider the potential social upsides of making or losing money with your own money.

I’ll sign-off with due humility and respect for differing opinions.

An excellent forum Jeff …. sincerely.

A thoughtful opinion, and a healthy discussion.

Shouldn’t the government put the people’s money in the hands of the people?

YES. In my opinion at least. And I mean that in the most literal and complete way.

Unfortunately, both the criminal politician and the naive fellow attempting to bend the actions of the government into a benevolent direction disagree.

These fellows think we aren’t smart enough to be left with our money.

That’s why taxes are collected. We are supposed to be such fools that we couldn’t protect ourselves from theft, fire, or any other evils without a nice old government to force its hands into the pockets — mine and yours — and see to those matters on our behalf.

Because these fellows exist and have built the largest, most powerful organization in the history of the world, we have hundreds of thousands of pages of laws and regulations no man has read in entirety.

And a particular little collection of those laws and regulations is what this 3-part blog post is about.

And, as is repeated thoroughly throughout the post and its comments, here’s the deal:

Congress writes laws. Certain other groups interpret them and talk about them through regulation. In the case of ROBS, that’s the Department of Labor.

DOL says, time and time again, that no matter how many rules are followed or how many exemptions are rightly claimed, nothing trumps IRC 4875(c)(1)(D) & (E).

And “(D) & (E)” say that YOU cannot direct your plan to do something in your own interest. That is, of course, beyond your interest in building wealth for future taxable distribution.

If you can demonstrate that a ROBS sequence of transactions does not benefit you beyond future taxable distributions, then the regulators and courts may be okay with your situation.

The purpose of this article is to shine a light on the much more commonly occurring sequence of ROBS transactions — the ones where the plan participant has acted in a manner designed to benefit himself.

Things like taking a salary or earning a large profit on the shares owned by the participant personally are a dead giveaway to the regulators and courts that a prohibited transaction has occurred.

Is the guy who does a ROBS prohibited transaction a “bad guy”?

In my opinion, morally, the regulators and courts are clearly the bad guy for financially attacking a person for trying to make use of his own money.

In my opinion, morally, income tax is the instrument that has recreated slavery, literally, and society at large will not see it. If you can’t keep all of your income, then another is claiming ownership of you, and that is slavery.

Buuuuuuuut… this blog is about empowering people.

And it is not an empowering thing to pursue ROBS illegally. I mean, if someone is to be a tax cheat, why not just stop paying taxes at the source rather than go to a bunch of trouble to jump through tax loopholes only to ultimately risk extremely negative consequences for breaking those same tax laws.

The guy who actually protests taxation at the source and rejects it universally on principle and Constitutional legitimacy? Honorable.

The guy who asks “how high?” when the tax man says jump, surrenders a third of his property perpetually throughout his life, and then rationalizes himself into a set of illegal transactions that give that same tax man the opportunity to attack him (maybe even lock him up)? A bad decision maker.

– Jeff

P.S. If you think blaming on an “independent trustee” the fact that you got hired by a company funded by your retirement money can convince anyone that it all happened with your hands tied behind your back… you have a healthy imagination.

Likewise, “but I’m providing employment!” isn’t going to strike much of a chord with the establishment that exercises its force at its will.

The solution is raising money from others. A very easy thing to do if the business is worthwhile. Sign up here to learn more:

http://www.nabers.com/services/small-business-financing/