avoiding taxable distribution
Using a ROBS how does on avoid the distribution rules – meaning when the funds are disbursed to purchase the stock it will look like a taxable distribution, how is that avoided?
Thanks for your question. One of the experts at Guidant can probably give you a more comprehensive answer, but from what you’ve outlined above it sounds like there may be a misunderstanding. When you’re using a ROBS, funds aren’t actually “disbursed to purchase stock.” Instead, when you use a ROBS to fund a business you start by setting up a 401(k) plan for your new C-Corp and then transfer retirement assets into that new retirement plan. Because funds are rolled over directly into the new retirement plan, they’re never disbursed and there shouldn’t be any confusion about potential tax liability.
Hope this helps. If you have additional questions we would strongly suggest that you reach out to Guidant for a one-on-one consultation.