Prohibited Transaction?

[Gary]

A two spouse Db plan wants to purchas a condo with pension money.

One of the spouses intends to use the property when he is in that town for business.

My initial observation is that it is a PT since a party in interest is using (or benefiting from) the property.

Does anyone know of any exceptions that might apply? And does it matter if when the property is used it is used as a home or an office?

I'm wondering if the property were used as an office and the spouse paid market rate rent to the plan if it would be acceptable as qualifying employer real property. I doubt this could apply if used as a personal residence even if fair market rent is paid to plan.

Thanks.

[david rigby]

I think there are several prior discussion threads that are pretty close to your scenario.

[AndyH]

This scenario is wrong on many levels. Besides the PT, how old are these people and what is going to happen when the time comes that the plan should be terminated? To make things more fun, have them rent it out to a relative when Hubby is out of town and have another PT and pay unrelated business income tax.

[mwyatt]

Gary, I have to wonder: are you really Jim Holland trolling?

[Gary]

These clients want every angle addressed.

So taking the devil's advocate role for the client to completion, the scenario could be:

plan sponsor purchases real estate to be used as an office and employer real property in the plan. They terminate plan and the value of the office as an in kind distribution rolled over to an IRA that accepts real estate.

Though I will cearly just instruct client not to make this purchase with pension money, curious to hear response to the devil's advocate scenario.

The only way I might think it is feasible would be in it were an actual office building.

Thank for the feedback.

[Guest chamiquefan]

Gary, I have to wonder: are you really Jim Holland trolling?

Hey mwyatt, are you an EBSA investigator trolling? Am surprised to see you reference Jim Holland :-)

[mwyatt]

Nope, just curious that these seem to be "test cases" posted.

Gary, seriously, have to consider Prohibited Transaction problems too. I'd recommend that your client run this by an ERISA attorney; us actuaries aren't qualified to give thumbs up or down (plus they can hang their hat/noose on the attorney instead of you).

[AndyH]

Gary, seriously, have to consider Prohibited Transaction problems too.

And unrelated business income tax.