ROBS 401K vs. SDIRA and Self Dealing & Prohibited Transactions

[Ron Burmeister]

I am currently using both a ROBS 401K and SDIRA to invest in real estate.  I use the ROBS primarily for Fix & Flips and the SDIRA for Private Lending and Buy and Holds.

There is a lot of discussion concerning self dealing and prohibited transactions with a SDIRA and I believe I have a good understanding of them.  However, there is not much discussion about self dealing and prohibited transactions when it comes to the ROBS 401K.  

My basic question is; Are there any self dealing or prohibited transactions issues with a ROBS 401K?  If so, what are they and where is the guidance located?

Can I personally (not my SDIRA) loan money to my ROBS 401K C-Corp?

Thanks in advance for your comments.

[Brian Eastman]

@Michael DeFilippo

A Self-Directed IRA is purely a diversification play. All investments are tax sheltered under the umbrella of the IRA. You may not benefit in any way, such as by use of the IRA held property, even if you pay market rent. Such a plan is purely about: "I can get better ROI for my IRA investing at arm's length in real estate than I can in the stock market".

The ROBS plan is not suited for passive holdings for several reasons having do with both with compliance needs of the structure, and that it would the entirely wrong vehicle for such endeavors from a tax perspective.  The ROBS plan is designed for you to own and operate an active business providing a product or service, and to be able to capitalize that business using existing tax-deferred retirement savings without penalty.  This structure is used to open a restaurant, insurance agency, or perhaps an active real estate construction & development company.

If you had such a structure in place and there was business owned property, you could not personally rent that property for residential use.