The End of Small Business Financing with IRA and 401k Funds? (Part 3) October 21, 2009
Posted by Jeff Nabers in Self Directed IRA/401k.Tags: 401, 401k, agency, audeo, benetrends, business startup, ersop, esop, financial, financing, funding, government, guidant, ira, irs, law, plan, president, profit sharing, QES, qualying employer securities, rainmaker, regulation, robs, rollover, ruling, scheme, self directed, small business, strategy
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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/401k.Tags: 401, 401k, agency, audeo, benetrends, business startup, ersop, esop, financial, financing, funding, government, guidant, ira, irs, law, plan, president, profit sharing, QES, qualying employer securities, rainmaker, regulation, robs, rollover, ruling, scheme, self directed, small business, strategy
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[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/401k.Tags: 401, agency, audeo, benetrends, business startup, ersop, esop, financial, financing, funding, government, guidant, ira, irs, law, plan, president, profit sharing, QES, qualying employer securities, rainmaker, regulation, robs, rollover, ruling, scheme, self directed, small business, strategy
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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…)
A Huge Leap of Progress in Affordable Healthcare July 15, 2009
Posted by Jeff Nabers in Health.Tags: coverage, economy, government, Health, health care, health insurance, healthcare, insurance, politics, reason
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As I hear more and more about the topic of health care reform, this video I came across a while back comes to mind. It cuts through (more…)
The most important financial question you must ask June 19, 2009
Posted by Jeff Nabers in Money.Tags: bernanke, bls, cpi, deflation, depression, ecnomy, fed, free market, freedom, geithner, government, greenspan, inflation, meltdown, monetary, Money, obama, paulson, prices, recession
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What is inflation?
I believe this is the most important financial question a person can ask. I am constantly on a trek to better understand money and wealth. Here is some of what I’ve learned thus far:
Per its original meaning:
- Inflation is not a rise in prices
- Inflation is a rise in the money supply
I have a 1920 Webster’s dictionary that says inflation is a rise in the money supply. I have a 2006 Webster’s dictionary that says inflation is a rise in consumer prices. From this point forward, I will use “inflation” for its original definition (an increase in the money supply) and I will use “price inflation” to refer to a general increase in prices.
How did this “Newspeak” happen?
Inflation is harmful because it leads to a rise in prices. When everyone’s expenses are rising faster than their incomes as a result of the actions of the government and banking system, it is like a tax on the American people.
With the harm being a rise in prices, the focus on the topic of “inflation” shifted from the cause (inflation) to the effect (rising prices). And so, over a period of decades, everyone (news media included) shifted into speaking about inflation as a rise in prices.
Why don’t inflation and price increases correlate directly anymore?
You can take simple economic examples and draw a direct correlation from increasing the money supply to a rise in prices not complemented by a rise in incomes. These are usually fictional stories of a group of people being stranded on an island and creating their own economy. They will illustrate with great clarity that increasing the money supply takes from the regular person and gives to the banker or his friends (such as the government).
Now apply those concepts to our current economy and you will be so confused, it will be easy to surrender to saying, “Gosh this stuff is for super-geeks to figure out and I’ll just go with whatever is reported to me.” Of course, we’ve learned that following the crowd and getting your information from normal reporting sources is a sure way to (more…)
Deciphering the Bank Stress Tests May 20, 2009
Posted by Jeff Nabers in Money.Tags: bail out, bailout, bank, bank of america, bernanke, citi, citigroup, fed, geithner, government, leverage, stress test, treasury, wells fargo
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Here are a couple highlights for a recent post over at Daily Reckoning regarding the bank stress test results.
- Banks need about $75 billion to reach “adequate capitalization”
- “Adequate capitalization” is when common equity equals 4%
- Common equity being at 4% means a debt-to-equity ratio of 25-to-1
- The current bank needs do not factor in the potential for bank assets to lose their value
- The current bank needs are based on a rosy worst case scenario of (more…)
How to Cope with Your New $50k in Forced Debt This Year March 6, 2009
Posted by Jeff Nabers in Money, Personal Enjoyment, Personal Productivity, Uncategorized.Tags: bailout, crisis, decicit, depression, economic, economics, economist, economy, government, meltdown, obama, recession, spending, stimulus
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There are about 100 million non-government, non-taxpayer-paid workers in the U.S.
$3 trillion normal government spending + $2 trillion additional emergency spending = $5 trillion government spending in 2009.
That amounts to $50,000 of government spending per non-government, non-taxpayer-paid U.S. worker in a single year.
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S&P Price-to-Earnings Ratio Says Market is Still 70% Overpriced March 3, 2009
Posted by Jeff Nabers in Money, Self Directed IRA/401k.Tags: 401k, bail, bailout, buy, crash, dow, dow jones, government, invest, investing, investment, ira, market, obama, out, P/E, panic, price-to-earnings, ratio, S&P, s&p 500, self directed, sell, solo, Solo 401k, stimulus, stock market, timing, wall street, when
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If you are choosing to stay in the stock market right now because of any of the following reasons…
- It is poised to bounce back
- You don’t want to close out losing positions
- Stocks are cheap right now
…then the simplicity of the following information may shock you.
Last week (more…)
Was Madoff a Better Investment Than Your Mutual Fund? February 25, 2009
Posted by Jeff Nabers in Self Directed IRA/401k.Tags: america, bernie, corporate, fraud, government, madoff, ponzi, regulation, scam, scandal, SEC
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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.
