My husband and I are the only stock holders of a C corporation.
The C corp has a 401k Profit Sharing Plan that owns a residential property.
The C corp leases the property to our son.
It is clear to me that this would be self-dealing if the property were owned by either my or my husband’s personal retirement accounts. Does it make a difference that the property is owned by our C corp’s Profit Sharing Plan?
You aren’t self-dealing, but it is a prohibited transaction. The corporation is a disqualified entity and cannot do business with disqualified people such as your son.
Many thanks BLL.
How are violations (prohibited transactions) reported to the IRS?
Do you know if the IRS currently take these violations seriously?
You have already been a great help.
Thank you.
They are reported by the custodian if they find out. The IRS takes the case very seriously.
How is that the 401 k custodian allows the plan to own property? Typically, investments are restricted to a handful of mutual funds.
Thanks again, BLL.
Wanting to keep my question on-topic for the readers of this great forum, I reversed the facts of my original post and kept it simple. A friend of mine has an upstairs neighbor (condo situation) who is harassing her and the two parties are now headed to court. Whlie helping my friend prepare, I noticed that title to the neighbor’s condo is held as “<his mother’s company name> 401k Profit Sharing Plan.” I do not have any more information regarding the plan. I have the company’s agent for service of process. How would I uncover the name of the custodian?
I hope this follow-up question is still appropriate to the forum. If not, many thanks for your wisdom regarding the original on-topic issues.
I don’t think you can find the name, but you can report the situation to the IRS and let them deal with it. My guess is they are their own custodian and that is another no-no.