The Hidden Meaning Behind the State of the Union Address January 29, 2010
Posted by admin in : Hyperinflation , 4commentsI just started watching the State of the Union address on Youtube and was immediately sickened.
I guess I should tell you that I’ve been physically ill since last weekend, but Obama’s speech isn’t helping. It was way too reminiscent of the scenes in the book (or movie) 1984 where the public is forced to participate in mass hate and love demonstrations for their enemies and leaders.
The Painter Announces He Will Install the Plumbing
The first thing that blows my mind about what was spoken on the topic of economics is the absolute retardation of reason. Nobody in the government knows anything about economics. Time and time again, they make predictions and statements that turn out to be completely wrong. These people (Congress, the President, and other bureaucrats) are not economists (and they only acknowledge the economists who support the philosophy of never-ending increases in government spending and power).
They are not the bringers of solutions. If our problems went away, then they’d lose their jobs because we’d have no need for them. They are problem-creators. They are hired to fail.
We are expected to celebrate an announcement that the stimulus worked? Hey didn’t the last President announce (more…)
The End of Small Business Financing with IRA and 401k Funds? (Part 3) October 21, 2009
Posted by Jeff Nabers in : Self Directed IRA Solo 401k , 19comments
Ok, now it’s time to solve the mystery. (Final Post) [see previous here]
In 1978 Jimmy Carter reorganized the government with this order, and this took the issue of retirement account prohibited transactions away from the domain of the IRS and gave it to the Department of Labor (DOL).
This fact was unknown to (or possibly ignored by) the ROBS promoters who claimed the IRS ROBS letter confirmed the validity of the ROBS strategy. The truth is that the IRS letter did not say whether or not the ROBS strategy creates a prohibited transaction because the IRS didn’t have the authority to say it. It was the authority of DOL. Ah, what fun bureaucracy can be.
Speaking with the Proper Authority
Now, I’ve known about this transfer of authority ever since the creator of the IRA LLC (late attorney Debra Buchanan) told me about it back in 2004. So I’ve been in close contact with DOL employees for several years. Here’s where the bureaucracy gets funny (or scary, depending on how you look at it).
A couple of weeks after the IRS ROBS letter came out, I called my friendly DOL contacts to ask, “What do you (more…)
The End of Small Business Financing with IRA and 401k Funds? (Part 2) October 19, 2009
Posted by Jeff Nabers in : Self Directed IRA Solo 401k , add a comment
[This is a continuation of a previous post. You should read that one first so this makes sense.]
The IRS Responds
For the first time ever, the IRS actually addressed the “financing a small business with an IRA or 401(k)” strategy. They called it “ROBS” for “roll over business startup,” and issued a letter on October 1, 2008. This letter basically stated:
- We know about the ROBS strategy
- We are concerned about it for several reasons
Celebrate and Ignore
Most ROBS promoters spun the IRS ROBS letter as a long-awaited government blessing for the strategy. They said that the concerns that the IRS listed were administrative errors, such as (more…)
The End of Small Business Financing with IRA and 401k Funds? (Part 1) October 15, 2009
Posted by Jeff Nabers in : Self Directed IRA Solo 401k , add a comment
Guidant calls it Audeo. Benetrends calls it Rainmaker. SDCooper calls it ERSOP. It goes by many names and it’s gotten a lot of attention from the franchise industry and, as of about a year ago, the IRS. The IRS calls it “ROBS” for Roll-Over Business Startup.
What is it?
It’s a strategy where a person with retirement funds:
- Forms a C corporation.
- Uses the new C corporation to adopt a 401(k) or profit-sharing plan.
- Performs a rollover from existing retirement funds (IRA, 401k, etc) into the new 401(k) plan.
- Directs the new 401(k) plan to invest into the new C corporation by purchasing shares of stock.
- Now this person has a C corporation with some or all of their retirement funds in it, and they are told they can use the funds to run the corporation, launch a venture, buy a franchise, and even pay themselves a salary.
Special Powers – For Good or Evil?
This is a tremendously (more…)
Why Does Government Fail? June 3, 2009
Posted by Jeff Nabers in : Money, Self Directed IRA Solo 401k , add a commentWhile everyone argues about what the government should be doing, 2 very fundamental factors are ignored.
In this video I discuss those factors. One thing I didn’t include (more…)
Who will arrest the investment police? May 17, 2009
Posted by Jeff Nabers in : Self Directed IRA Solo 401k, real estate , add a comment
An unsurprising story surfaced a couple of days ago… SEC attorneys are under investigation for insider trading!
If you can’t truly value that exclamation point I just used, let me help you. The Securities & Exchange Commission (SEC) is a government organization that was formed to convince us that investing in the stock market was safe. Part of their role is to make sure people don’t use their non-public knowledge to make profitable investments in the stock market (yeah, right). This is called “insider trading”. In business, this is known as “doing business”. In real estate, non-public knowledge can turn a peon into a mogul overnight. But in the stock market it is a crime and we give the SEC billions of our dollars to make sure it doesn’t happen.
But, whoops, SEC attorneys are doing it themselves. And a lot. One of the two SEC attorneys currently under FBI investigation made 247 stock (more…)
Was Madoff a Better Investment Than Your Mutual Fund? February 25, 2009
Posted by Jeff Nabers in : Self Directed IRA Solo 401k , add a comment
Blogger, owner of the Dallas Mavericks, chairman of HDNet, and billionnaire Mark Cuban poses the question:
Was Madoff a better investment than your mutual fund. Surprisingly, his answer is yes. To see why, read his post.
Warning: Don't let administrators act as custodian – Part 3 January 15, 2009
Posted by Jeff Nabers in : Self Directed IRA Solo 401k , add a comment
*** This is Part 3 of a series about the dangers of letting an administrator act as custodian. Make sure you read Part 1 and Part 2 first to make sense of this post. ***
The illegitimate custodian test
Ask “Who should the check be payable to for the rollover contribution or transfer?”
Ask “If my IRA buys real estate and rents it out, to whom should the tenant make the rent checks payable?”
Ask “If my IRA owns real estate that needs repairs, who issues and signs the check to the repairmen?”
These questions will tell you who is actually serving as custodian. For instance, if you live in TX and unregulated company Dotrust is marketing its self-directed IRA services to you, the answer to one or more of the questions above will probably be something like Dotrust of Texas, Inc. If this is the case, ask to see its bank or trust charter – if it is an illegitimate custodian it won’t have one, and it will insist that another bank is technically the custodian. It not only matters who’s the custodian on the paperwork is; but it also matters who is acting as custodian as uncovered by the answers to the 3 questions above.
Why would somebody operate an illegitimate custodian company?
First of all, if it’s a franchise operation, the franchisee might not even know that he or she is part of an illegitimate IRA custodian scheme. Secondly, there can be a lot of profit to be made in an illegitimate IRA custodian scheme. The company can earn interest off of your IRA funds, and it may pass only some (or even none) of that interest earned on to you. It may also be able to earn higher interest rates when it collectively has custody of hundreds of millions of dollars in funds.
Surprised?
You may be thinking “This sounds like a company I’ve run into. But it promotes and and advertises and has been in the business for decades… it can’t be illegitimate, can it????”
Many high-profile schemes have been shut down. The private annuity trust scheme was promoted for over a decade before the IRS shut it down. Additionally, being in business for decades doesn’t guarantee that business is legitimate. Look at Bernie Madoff.
Madoff may be a harsh comparison. Those involved in an illegitimate IRA custodian scheme may not be knowingly harming anyone. They may even be attorneys or CPAs. They may believe they’ve merely created a loophole for themselves with the “stepped transaction” arrangement. They may be good people. But the bottom line is that there are significant risks you take in using their services, and you will pay the consequences if uncovered by the authorities. In my opinion, it never makes sense to use an illegitimate custodian because there are dozens of regulated/legitimate self-directed IRA custodians out there. There should be a balance between risk and reward. There is significant risk of using an unregulated/illegitimate custodian, and it offers no unique reward that isn’t offered by other self-directed IRA custodians.
Confused? If you have a self-directed IRA or are thinking of opening one at a custodian company, perform the illegitimate custodian test as described above.
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Warning: Don't let administrators act as custodian – Part 2 January 13, 2009
Posted by Jeff Nabers in : Self Directed IRA Solo 401k , add a comment
*** This is Part 2 of a series about the dangers of letting an administrator act as custodian. Make sure you read Part 1 first to make sense of this post. ***
Signs that your custodian may not really be a custodian
- They sometimes call themselves an administrator. “Administrator” is an accurate label for any company who provides record keeping services. Being an “administrator” doesn’t require any regulation. These types of companies may expand their services to include asset custody without actually registering as a bank or trust company.
- Their name contains the word “trust” attached to other letters or words. A legitimate custodian usually has the word “bank” or “trust” as a separate word included in its name. In most states, the word “trust” is a restricted word for naming companies – just like the word “bank”. This means that you can’t start a company called “ABC Bank” unless it’s registered as a bank. You also can’t start a company called “XYZ Trust Company” without being a registered trust company. An illegitimate custodian might get around this by calling themselves Trustus rather than Trust Us, Dotrust rather than Do Trust, or Safetrust rather than Safe Trust. You see, if trust is attached to another word instead of used as a separate word, then it sneakily gets around the naming restrictions.
- They have dozens of offices all around the country. Expanding to dozens of cities across the country can (more…)
Warning: Don't let administrators act as custodian January 7, 2009
Posted by Jeff Nabers in : Self Directed IRA Solo 401k , add a comment
To have a self-directed IRA, unlike a Solo 401k, you must have a self-directed IRA custodian… and you should stay away from unregulated companies masquerading as a custodian. A self-directed IRA custodian is one that will have less investment restrictions than the more common tradition stocks/bonds/funds brokerage-type custodian, and they usually allow investment into real estate, private companies, and other alternative assets.
An IRA is technically a trust, and a custodian is basically a trustee who performs fewer duties than a trustee usually would. As the name suggests, the sole duty is custody-holding assets and/or property on behalf of the trust.
The Internal Revenue Code says that the IRA custodian role can only be served by:
- A bank
- A trust company (this is the most common type of company to serve as self directed IRA custodian)
- A company specially & specifically approved by the IRS (this is very rare)
So, essentially, in the self directed IRA market, most custodians are chartered as (more…)
