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This is the more recent discussion I remember - allowing hardship to prevent eviction or foreclosure where the participant was a resident of the dwelling but not the owner or named on the lease. I don't think your current case is any different, except maybe some additional proof that the participant will indeed be living there. I would think the girlfriend would have to disclose this source in her mortgage application. Of course, if the participant's spouse has to sign off on this hardship distribution the whole transaction falls apart!

Don't do a profit sharing?

Sorry, but no way would I ever be able to stretch the language to allow this as a hardship. If you really think it is doable, then you need to request a ruling from the IRS to clarify, but barring that, it is NOT a purchase of his primary residence, it is effectively a rental payment to someone else and that is not a permissible hardship distribution. Anyone who advises a client that this is ok has no basis for such a decision (no regs, no cases, nothing but their own tortured reading of the law), and that's a good case of a malpractice claim. FWIW.