hardship distribution, principal residence could be a duplex

[Guest cbclark]

A plan only permits safe harbor hardship distributions. Participant is leasing a unit or apartment in a duplex. The duplex is for sale, participant wishes to buy it and remain in residence in the unit. We think in this situation a plan administrator could approve the harddhip distribution (although there is a small segment who say NO), even thought there is a second rental unit.

New twist: the property being sold actually has two buildings on one piece of land, thus two duplexes and four units. We think the parcel cannot be partitioned. Participant wants to buy the entire parcel and remain in the unit as his or her primary residence. Now we think perhaps this is not within the safe harbor because of the income-producing aspect of three units.

Any thoughts? Thanks in advance.

[masteff]

Since I don't have the resources to effectively search PLRs (which is just about the only place I'd think this topic might possibly have been covered), here's my one thought...

How much is being requested versus the total purchase price? If the 4 units are roughly same sized then you could estimate the "principal residence" portion is 1/4th of the total cost. As long as the distribution isn't more than than amount, then I'd think you'd be w/in the intent of the reg.