401K Dist, reduce income tax through cost segregation v. ROBS?

[Mark Doty]

Before exploring this concept with a qualified legal and tax professional, I wonder if any of the community has anecdotal experience around taking a distribution from a 401K and balancing the earned income taxes with paper losses from doing a cost segregation study.  I haven't been able to find much information around this topic so I admittedly may be searching for a unicorn.

My scenario: I have a (2-4) unit multifamily with serious rehab that falls very close $1M ARV. My goal with the property is to execute the BRRRR strategy and hold for the long term, so I think a cost seg might make sense. I'm also considering a 401K distribution or perhaps a ROBS strategy to free up more capital to scale and the purpose of the post is to weigh the pros, cons and feasibility of these options. Ultimately, I'm considering the ROBS or distribution options to eject from the corporate world.

If the cost segregation shows $100K of paper loss/bonus depreciation, etc., can I balance this loss against earned income of $100K from a 401K distribution?  I realize there will an unavoidable 10% penalty to take out the 401K, but I'm curious about the potential income tax avoidance.

Can any of you see major flaws in either path?  I won't take any comments here as legal or tax advice.

[Brian Eastman]

@Mark Doty Flipping yes, apartments no.  Apartments produce passive rental income.  If you had a legitimate business under a ROBS it could also hold rentals, but would be entirely the wrong structure for doing so.  You don't want to hold rentals in a C Corporation and turn rental income into corporate taxable income.