The “Jury” Decides on ROBS – Can you legally fund a business purchase or startup with a Self-Directed 401k? September 15, 2011
Posted by Jeff Nabers in : Business Start-Ups, Rollovers As Business Startup, Rollovers As Business Startups, Self Directed IRA Solo 401k, Small Business Lending, Uncategorized , add a comment
Boy do I get a lot of blowback every time I share my findings about why the government has declared ROBS illegal!
Why is there not a specific government ruling on ROBS?
Great question!
It’s because once an issue has been ruled on, they don’t repeatedly consider it. “They” are the Department of Labor, and the first step of learning about Self-Directed IRA and 401(k) rules is finding out that “prohibited transactions” are an issue outside the jurisdiction of the IRS and in the hands of the Department of Labor (DOL).
When ROBS Was Ruled On
It was 2006. Debra Buchanan, the creator of the IRA LLC, asked the DOL a question about structuring an investment deal to avoid “prohibited transaction” status. (This was before she split with Guidant and became my legal counsel, but that’s another story.)
The DOL came back and said (paraphrased)
It doesn’t matter how you structure things or pursue exemptions. We’ve been clear throughout various rulings ["Advisory Opinions"] that a specific part of the law books [IRC 4975(c)(1)(D)] makes it prohibited for IRA or 401(k) funds to be used to benefit their account owner or family, unless it’s a taxable distribution.
That’s translated into humanspeak. You can see the actual ruling here. Untranslated legal language in it says:
…Department opinions interpreting [regulations] have made clear that a prohibited transaction occurs when a plan invests in a corporation as part of an arrangement or understanding under which it is expected that the corporation will engage in a transaction with a party in interest (or disqualified person).
The ROBS Coffin Is Sealed
This issue is so straightforward because DOL ruled on it as a bigger issue. DOL has received countless letters that ask “But what if I structure my Corporation this way or that way… do I then successfully evade the rules and regulations?”
And they always respond, “No. Using Self-Directed IRA or 401(k) funds to benefit the account owner or their family is always prohibited unless it’s through a taxable distribution.”
Tip: Don’t Piss Off The Government
I know that’s kind of common knowledge, but I wonder if you notice from the DOL language—”Department opinions interpreting [regulations] have made it clear”—that they are already (in 2006) annoyed at all the clever attempts at evading the rules and regulations.
Not a whole lot of wiggle room here. Zero, to be exact.
I know, I know… it’s bitter medicine. Especially if you dreamed up an awesome future all provided to you by ROBS.
But it’s quite easy to swallow if you get real and refocus your attention on legal strategies that actually work.
Getting Around Prohibited Transactions August 31, 2009
Posted by Jeff Nabers in : real estate, Self Directed IRA Solo 401k , 16comments
Prohibited transactions is a chief topic when exploring self-directed IRA & Solo 401(k) investing. When a person first discovers that his retirement accounts have been chained to Wall Street brokerages without necessity, his mind starts to imagine the possibilities.
Real Estate? Yes.
Private Businesses? Sure.
Precious Metals? Absolutely.
Getting my hands on my retirement money now? Slow down there.
There are two types of limitations on the average retirement account. One is an unnecessary restriction of investment options to securities products. That can be eliminated through restructuring your accounts and funds. The second limitation is legal and cannot be removed.
Setting up a self-directed IRA or 401(k) is about removing limitations. Once you have it setup outside the nearly monopolistic network of securities dealers, you can invest in almost anything… but you must fully understand the legal limitations.
The general premise behind prohibited transaction rules is that the government wants you to grow your retirement account as big as possible because they plan to tax it later on when you distribute the funds to yourself for spending. Without prohibited transactions rules, anyone in their right mind would (more…)
Prohibited Transactions Guide Book – 50 Free Copies September 22, 2008
Posted by Jeff Nabers in : Self Directed IRA Solo 401k , add a comment
I’ve written a comprehensive guide book on prohibited transactions. These will be available for sale soon for $39 + $5 shipping. I’m making 50 copies available completely free of charge on a first come first serve basis.
If you’d like one of these 50 free copies, please email your name & shipping address to:
specialoffer3 [at symbol] nabersgroup [dotcom]
This blog has been viewed over 20,000 times since April, so act fast 
### Update – October 3, 2008
We have (more…)
Coinvesting with your plan / Partnering with disqualified persons July 24, 2008
Posted by Jeff Nabers in : Self Directed IRA Solo 401k , add a commentWhat if you could combine your retirement funds with your personal funds and additional monies from other family members? Well, you can… sort of. This question was asked and answered in a Department of Labor Advisory Opinion in July of 2000.
Click that link above to read the opinion in its entirety, but here’s my summary in its most basic form:
Your plan can partner with disqualified persons in certain situations, BUT there are many possibilities for a prohibited transaction in operating the partnership.
A prohibited transaction is when a retirement plan transacts with a disqualified person. The DOL Opinion says (more…)
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