Employee funded retirement plan to horse farm

[spt]

I have a client that is an employee of a vet office. He is eligible to participant in the company retirement plan. The money goes to the owner's (vet) thoroughbred horse farm in KY. Can retirement funds be used for this? How would the horse farm have to be setup to accept employees retirement money? About $20,000 of my client money will go to this each year. Is this legal?

[Jiggers]

Horse Farm Retirement Plan?

I have a client that is an employee of a vet office. He is eligible to participant in the company retirement plan. The money goes to the owner's (vet) thoroughbred horse farm in KY. Can retirement funds be used for this? How would the horse farm have to be setup to accept employees retirement money? About $20,000 of my client money will go to this each year. Is this legal?

That would be the last place to put my retirement money.

Sounds like something that needs to be investigated.

[snowshine]

Assuming the farm is operating as an S-corp, then a qualified plan (non-IRA variety) can become a shareholder. I'd still be wary. By the way, since when can a vet tech put $20,000 a year into a retirement?

[Lion]

IRAs

There are IRAs that own all kinds of investments. There are some personal use issues that could be a problem for the employer who also owns the house farm, but would not be for his employees. However, does your client really want to put his retirement funds in a horse farm?

[taxdude71]

Depends on the horse farm. Granted, most are just tax write offs, but some of the larger ones that have stud services make huge returns.

[snowshine]

Sorry, i was assuming the vet is also the trustee for the retirement plan (as he is investing in his own business this seemed reasonable). hence the IRA/SEP/SIMPLE remark

[JohnH]

Guaranteed way to make a small fortune with a horse farm.

1) Start off with a large fortune
2) Begin investing in the horse farm
3) When you decide you've lost enough to call it a small fortune, stop investing.

Simple & quick.

[Snaggletooth]

Add to John H

I'll add #4 to John's plan:

4) Withdraw $20,000 from your employee's paychecks, call it a "retirement plan" and wait for an Enron-style collapse.

[spt]

employee not eager to invest

in the horse farm, but he thinks he has no other options. I thought in a qualified plan the employee could select the way his money is to be invested and at least annual information is suppose to be available to the investees. I believe the owner vet is acting as trustee but not sure or that fact.

I am needing to advise my client as to whether this can be legal or how or what he needs to do to obtain more information about the "investment".

[spt]

client is a vet also

not a tech. But he is an employee of the owner vet.

[JohnH]

Is this a situation where the employee needs to keep their job? Not trying to sound an alarm here, but keep in mind that asking too many questions may tirgger the law of unintended consequences.

[Lion]

Plan

I would suggest the employee politely ask to see a copy of the plan document to better understand his options. He can make that request showing great enthusiasm for his employer's generosity and investment opportunity.

[ChEAr$]

I would suggest the employee politely ask to see a copy of the plan document to better understand his options. He can make that request showing great enthusiasm for his employer's generosity and investment opportunity.

LOL! And then say no.

[JON]

Prudent man investment

in a horse farm I doubt it. If the vet practice is incorprated - why does he not buy some of that stock? I do not think you can unless you have an ESOP which you would have to qualify for. I think this goes to related corporations also. Enron used corp stock as an alternative for retirement plan investing. So there are some holes there.

If the horse farm did go under and the vet remained solvent there would be no way he would not be liable for all the loses on the horse farm. You probably would not even need an attorney for that one.

I have not looked for a while, but where does it say that a retirment plan is an eligible stockholder for a Sub S corporation???

" I get a retirement plan deduction on my vet business, but invest it, after already taking that deduction, into my horse farm. If that was possible I am surprised there are not a lot of CPE courses on how to get seed money into your corporations while getting a tax deduction."

Anything is possible, but this one does not even get to the smell test.

[JohnH]

LOL! And then say no.

I'm concerned he would give me all the documentation and then say "I'm thrilled to see you're so enthusiastic. Let's max out your 401(k) contribution on the qualified side and I'll also let you buy more stock in the operation with non-qualified funds as well. My financial advisor at Dewey, Cheatem, & Howe says it's all perfectly legit."