Very interesting article. Just a question, where are the sections for penalties. You have said you will owe 115% of the principle, could you please reference me to the Section of the Code or ERISA for this???

@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.