Can A Qualified Plan Invest in Foreign Real Estate?

[Dougsbpc]

We have a client who has a small defined benefit plan and 401(k) plan. Only he and his wife are participants.

He wants to invest in Austrailian real estate. Can this be done?

Thanks.

[MoJo]

My "gut" is going to say no - as you have a jurisdictional issue with a "real asset" held outside of the U.S. (i.e. U.S. courts would be powerless to issue any order over the foreign property). I'm sure their is someone who could/would give you a more thorough analysis of hte issues and a cite.

My point in posting, however, is that their are ways around that. Create a corporate entity or partnership in the U.S. that holds real estate - then have the plan invest in shares or units of the corp. or partnership. Not saying there might not be prohibited transaction or tax issues to consider, but generally I see plans investing in real estate through a pass through vehicle rather than directly.

[My 2 cents]

Australia? Why Australia?

Just curious - why would they want, in particular, to invest in Australian real estate? Did they perform some sort of analysis indicating that Australian real estate has the highest potential for growth of any available investment? Do they have inside information that the parcel in question contains a huge quantity of opals?

Aren't there US-based international real estate investment funds, offering good value, growth potential and diversification?

[david rigby]

Australia? Why Australia?

Or..... might the husband/wife own some vacation property??

If so, many prior discussions about prohibited transaction.

[Flyboyjohn]

I don't believe where the dirt is located matters, what matters is that there's a domestic Trust and a Trustee subject to jurisdiction of US courts.

That being said I like the suggestion of holding title in a shell entity and having the plan own the entity for more reasons than just qualified plan issues.