Amakudari

Definitely all valid answers. I was thinking about this today. I see it like this. Generally, all contributions (Pre Tax Gross Income) to my 401k are tax free. I took out a loan of $20,000.00 from my 401k to make a downpayment on my first home. I am now repaying my(self) 401k $20,000.00 plus 4% interest from my Net Income (taxed income). When I retire, I will be taxed on my distributions from my 401k. Some seem to argue I am being taxed twice, others argue I am only being taxed once because I have to repay myself and it does not matter where the money came from (as long as I did not take it from Joe down the street). Double taxation is a dubious claim because I have to pay myself back, but what is NOT happening is this: I borrow $20,000.00, tax free, from my 401k. I place a $20,000.00, tax free down payment on a new home. I repay my(self) 401k with pre tax gross income. <<<< (I wish!!!) Wash. Rinse. Repeat. <<<< (If this were possible, I would own a second home, a boat and buy all my groceries with money borrowed from my 401k and never pay taxes on it. Then die on my boat after I retire with no 401k savings.) I figure there are three ways to get around this. Option 1: Find work outside of the US and request the amount of income that places you above the taxable threshold be paid in stocks or under the table. And be sure not to return to the US and buy homes, expensive carpets and coats made out of funny looking animals. Option 2: Become a mob boss and don't pay taxes. Use that income to repay yourself. Option 3: Don't borrow from your 401k.