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Asked 12/15/2008

401k to buy business

At the end of 2006, my husband borrowed half his 401 to buy a business. He had since been laid off from the job that provided the 401k. now we owe the Irs the penalty. Since it was used to buy a business can they still tax us?

 
 
 
 
 
Answers

Answer 1/3 - Submitted 12/16/2008

It doesn't matter why he pulled it out. He pulled out money of his 401k and he has to pay the penalties.

 
 

Answer 2/3 - Submitted 12/21/2008

Gee, arent you supportive and helpful. But if it was used for a primary residence claimed as hardship it would be differant right?

 
 

Answer 3/3 - Submitted 11/13/2009

A Self Directed IRA and 40ks avoids penalties and allows you to invest in many things including real estate, businesses, and other alternative investments. A self directed 401k allows you to purchase a business, and pay yourself a salary and grow the investment for retirement. Land banking is a great alternative investment for self-directed IRAs. The Self Directed IRA is a unique option for those who are tired of loosing retirement money in the market with the limited options their plan offers. You can invest in just about anything, except for life insurance contracts and collectibles, as long as it is not what is called a "prohibited transaction" meaning that the investment cannot be for your personal use, but must be a true investment, and cannot be with certain people or "relatives". A bank loan can be utilized in conjunction with the self-directed IRA, which adds a few complexities to the purchase. Or you could pool your money with other investors to make the purchase. My company specializes in providing this alternative investment option, so contact me if you are interested in finding out more about it.

 
 
 
 
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