Real Estate Hypothetical Investment for NQDC Plan?

[Alf]

Anyone ever been asked to by participant to "measure" their account returns based on investment in a real estate parcel. Rabbi trust would hold the investment (if acceptable to trusteee). I can't see a reason why this would be taxed differently than a hypothetical mutual fund investment as long as the participant was not receiving any current use of the parcel. Could the investment be distributable in kind?

[TCWalker]

How does this real estate parcel generate a measurable return? Anyway, your client should engage counsel to look at the GCMs and Ltr Ruls pertaining to the imposition of tax to the participant under a economic benefit doctrine analysis. Your facts seem to suggest - a real estate asset identified by the employee will be acquired by the employer or trust under an agreement that contemplates an unconditional set aside and use for one employee's sole benefit.

[mbozek]

Why would RE be a good investment for a nqdc? There are expenses with maintaining a RE investment that do not occur in other investments such as property taxes, insurance, maintenance, etc. In addition the owner of the property will have liability risk for negligence and environmental issues so I dont think too many trustees will want to own RE without a hold harmless agreement from the employer. Finally the transfer of the RE to the employee will be taxed as ordinary income and not capital gains.