New Plan Just for Loans

[Young Curmudgeon]

I have a prospective client who wants a Profit Sharing plan so they can roll IRAs into in and borrow. I am sure that I have read that this practice is frowned upon and the IRS can claim the plan is not qualified since the intent never existed to make contributions. I can not find anything that states this now. Is this just early dementia or does anyone recall where this position may have been published?

[Belgarath]

I don't recall anything official published by the IRS on this, although maybe there was and I've also forgotten. But I think the concern may be based upon 1.401-1(b)(2) which requires "recurring and substantial contributions."