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Run like Forrest Gump!!

And let's talk about in-kind distributions. Assuming there are other participants, he would have to offer in-kind distributions to everyone!!!!! A sure fire way to screw up the plan. Not to mention the issues of valuation. And, no one has even talked about the fact that you would have to pay cash for the property since debt financing producing unrelated business taxable income! Enough reasons I think to (quoting a famous first lady) JUST SAY NO! :-)

Bpenfold: It ISN'T allowed. Perhaps the two prior responses weren't clear enough. What he wants to do is a prohibited transaction and not allowed. Hopefully that is now crystal clear. Larry.

Real estate can be purchased the devil is in the details and they can be tricky. A 2nd home for the good doctor, err I mean client. is almost certainly going to run afoul of the prohibited transaction rules. Don't forget your annual fair market appraisal, possible annual audit requirements if you are a small plan that no longer qualifies to waive the audit, and your increased bonding requirements. Suggest your client consults with qualified ERISA counsel who deals with real estate transactions to make sure they know all the PROS and CONS of real estate investments in a qualified retirement plan and to make sure they are not running into a prohibited transaction and the plan will have enough liquidity to met all of its distribution needs.