You're going to pay Federal tax on profits as ordinary income.

With my situation I will Not have to pay the 10% early withdrawal penalty but would be subject to the federal/ state taxes.

If I can't be comfortable with the SD IRA companies, the only alternative is to pay the federal & state income taxes & 10% federal early withdrawl penalty, so we can buy things other than what the brokerages offer.

Be mindful that if you have a 401k and it's not kept in compliance, it will make things really easy for the IRS to simply condemn the plan and present you with taxable assets.

Anything of value in exchange for work is income.You may be required to provide withholding deposits as well, state and federal.

The interesting observation is those proclaiming this position the loudest are often the ones who have done little or nothing in legalizing their lending operations, let alone worked to achieve compliance under state and federal law.

This is Federal law.

They manage their taxable income and let there overall investments grow and take out what they choose.I run across a lot of people making large incomes that are accumulating some net worth.

Bankruptcy is a federal code, with state specific laws.

Or is there federal incentive for them to hold onto them?