question on schedule I -re. real estate

Hi,

Thank you all , as always, for all the insights. I have seen those that have stated on this forum that an EZ Filer that answers yes to having participant loans is a flag. On the 5500 -schedule I there is a question if the plan held a part of the assets in real estate. If you answer yes to this question, is this a flag as well. And if this is indeed a flag, is it advisable to stay away from investing (DB Plan assets) in real estate to avoid this (even though clearly legal to invest a portion of the assets in Real Estate-with diversification, less than 20% of the assets etc.). Thank you,

24 minutes ago, SSRRS said:

I have seen those that have stated on this forum that an EZ Filer that answers yes to having participant loans is a flag.

I don't know about that.

24 minutes ago, SSRRS said:

On the 5500 -schedule I there is a question if the plan held a part of the assets in real estate. If you answer yes to this question, is this a flag as well. And if this is indeed a flag, is it advisable to stay away from investing (DB Plan assets) in real estate to avoid this (even though clearly legal to invest a portion of the assets in Real Estate-with diversification, less than 20% of the assets etc.).

I honestly don't know if it is a flag.  There are other reasons for not investing in real estate in a plan, starting with 1) valuation - what is it worth, each year? and 2) real estate often involves financing, which can trigger Unrelated Business Taxable Income, and 3) in small plans, owners often blur the lines between the plan and their personal investments, and don't understand that they can't buy/sell from/to themselves or a family member, or invest jointly with same, and otherwise gum things up by paying taxes and other expenses themselves when the plan should be paying, etc. etc.  As you note, it is clearly "legal."

Thank you, Bird. Yes, the mingling of personal and plan investments is quite common.