The ability to successfully structure self-directed IRA and qualified plans into nontraditional and potentially lucrative investments always depends on understanding the Prohibited Transaction rules set forth in IRS Code Section 4975. In some cases these rules appear intentionally broad and cryptic. Frequently, we look to tax court decisions, private letter rulings, and the pondering of experts to guide us in the quest to find the best investment offering the most control over the outcome while still steering clear of Prohibited Transaction pitfalls.

The 2004 court case Joseph R. Rollins vs. The Tax Commissioner - 11/15/2004 offers self-directed investors some clarification with regards to the Prohibited Transactions and further clarification of the definition of "disqualified persons" with regards to one's retirement plan investments. Briefly stated, the Rollins decision was based on the following set of circumstances:

Rollins was the administrator for his own 401(k) plan. He also owned less than a controlling interest in three legal entities. Each of these entities borrowed money and executed a promissory note with Rollin's retirement plan at terms that would be considered fair market. Mr. Rollins acted as treasurer for these entities and was the signer on the promissory notes on behalf of the entities as well as directing the plan to fund the loans.

Definition of "Disqualified Persons"

A "disqualified person," in most cases, includes the IRA holder, lineal ascendants and descendants of the IRA holder, as well as any entity where the aggregate ownership share of disqualified persons constitutes a controlling interest. For example, if the son and daughter of an IRA holder owned 50% of CrazyPants LLC, the IRA could not do business with CrazyPants LLC, regardless of the fairness of the terms of the transaction. Using these rules, it seemed permissible for Mr. Rollins' plan to loan money to entities that were not "disqualified" as he did not own 50% of any of them.

Disqualified persons: while the definition covers employers, employee organizations such as collective bargaining units and other employer and family relationships, it is our experience that it is the IRA holder and his family members who are most often involved when deals are put together. The IRS has provided definitions of when transactions with these individuals will run afoul of the prohibited transaction rules. As a result, transactions are often designed with those definitions in mind in order to avoid a prohibited transaction issue. Mr. Rollins did exactly that in designing the plan loans. He acknowledged that he personally was disqualified but the transactions were with entities that were not. Yet the court determined that the loans gave him an indirect personal benefit and thus were prohibited transactions.

Disqualified Persons and The Rollins Decision

The Rollins Decisions caught some of us off guard because of the "controlling interest" definition we have carried around for so long. The resulting refinement of this definition has taught investors to look further into the structure of a transaction and examine: 1) Who is negotiating for each entity? 2) Who is responsible for carrying out the terms of the agreement/note? 3) Under what circumstances could the "use of" or "investment of" plan assets indirectly (or directly) benefit the interest of a disqualified person?

Judicial Observations:

Rollins, "the petitioner," owned from 9% to 33% interest in the three entities involved. Although he did not hold a controlling interest of "50% or greater," the judge made the following observations after ruling against the petitioner:




The petitioner was the single largest shareholder by a significant margin in all three entities. The comparison between his share and the shares of other shareholders was a focus of this decision.


The petitioner held the positions of president, secretary, and treasurer, as well as being the registered agent of all of the entities.


The treasurer, Rollins, was the signer on all the notes securing the indebtedness.


The notes were at higher than market value and there was no default. Mr. Rollins' Plan benefited from the security and the income of the investment.

Mr. Rollins had the burden of proving that he did not use the plan assets for his own benefit. The court determined that Mr. Rollins failed to carry this burden, noting specifically the sparse evidence presented.

Good Deal versus Bad Deal for the IRA/Qualified Plan

It is clear from this case that the substance of the transaction, "Was it a good or bad investment?" had no bearing on the ruling against Rollins. Simplistically defining "controlling interest" as a percentage owned by a disqualified person was not looking deep enough into the issue of whether or not there is self-dealing in the transaction. Disqualified persons involved in a transaction who are deemed to be receiving an indirect personal benefit, or "self-dealing," results in the transaction being a prohibited transaction.

Self-directed plan investors planning investments where disqualified persons or entities are involved, even in a less than controlling status, should realize that the IRS Tax commissioner can, and obviously will, look deeper than the broad percentage guidelines. He will look for, among other things, convincing evidence that there is NO personal benefit derived from the transaction, directly or indirectly, by those disqualified. Furthermore, investors must recognize that decisions with regard to prohibited transactions will not be decided solely on the merits of the investment itself. Prohibited transactions are just that - prohibited. As stated by the judge and worth noting by all of us when structuring investments for our IRAs or Qualified Plans: "Good intentions and a pure heart are no defense".

By: Catherine Wynne
www.NewDirectionIRA.com
Catherine Wynne is President of Entrust New Direction IRA, Inc, which provides account administration and recordkeeping services for Individual Retirement Arrangements and other plans to clients who want to control their own investment decisions. Entrust New Direction is committed to providing clients and their financial advisors with the best information and quality education. We believe that informed clients will be more likely to recognize and take advantage of investment opportunities available to their self-directed IRAs and other self-directed qualified plans. We provide information not only through our web site, but also through seminars and workshops throughout the West, as well as radio shows, books and CD-ROMs.

A claim for social security disability (SSD) or SSI is approved or denied at one of three levels. First, a claim is evaluated by a disability examiner for the social security office, who may approve, but will most likely deny the claim; then the claimant can file for request for reconsideration (even more likely to be denied); and finally, the claimant can request that his or her case be heard before an administrative law judge (ALJ), where the claim has the best odds of being granted.

At the first two levels, when dealing directly with the state disability agency, many claimants choose to forgo legal counsel. This saves the claimant legal fees, and in any event it can be difficult to get a disability lawyer to represent you at this stage-many attorneys will not take on a case until the initial claim and request for reconsideration have been denied.

However, when your case comes before a judge, it is well worth the cost to have a disability lawyer at your side. Experienced legal counsel can help present your medical evidence in such a way that both supports your claim of disability and follows the guidelines of SSA rules and regulations.

In the event that the ALJ decides to have a vocational expert (VE) present at your hearing, you will most certainly need a seasoned disability lawyer at your side. This is because the sole purpose of a vocational expert is to provide the judge with a list of jobs available in the national economy that someone with your qualifications should be able to perform, despite your current medical condition. To put it simply, the VE will discuss your limitations; i.e., whether you can bend, lift, sit for extended periods of time, etc., then tell the court that despite your difficulties you can still work, and then give examples of the types of jobs out there you can perform.

In fact, the a court-appointed VE is almost always the adversary of the claimant, and if the court has requested the presence of a vocational expert in your case, the chances are the judge is already of the opinion that you are not disabled, or at least that you are not incapacitated to the point that you cannot work. By hand-picking a VE to refute your case, the judge is in actuality seeking confirmation of an opinion which he or she has already formed, which is in all likelihood unfavorable to the claimant.

When a vocational expert is present, it is most critical that a disability attorney present your social security disability case. It is the rare case that a claimant is able to refute expert testimony in any meaningful way. Remember, the VE will know how to interpret your medical records and work history in a way that will result in denial of your claim, and it will take an experienced disability lawyer, one who is familiar with such vocational testimony, to develop a legal strategy that results in the approval of your disability benefits.

By: Carol Duncan
Carol Duncan, the writer of this article, is the founder of the Social Security Disability Resource Center blog.

Multinational business owners and executives are the elite, as far as the US immigration law is concerned. This is why they are classified as having the highest priority when it comes to US Permanent Residency. Their cases are exempted from Labor Certification, and glide through the Green Card process fairly effortlessly, as long as they meet the minimum requirements: At least 1 years employment as an executive (or professional manager) for a company that has an affiliate, subsidiary or parent in either the US, or any foreign country.

While the above mentioned process is fairly obvious and straightforward in the case of an established ownership arrangement between companies on both sides of the ocean (or, on either side of the border, in the case of Canadian and Mexican entities), it is much less apparent when there is only a foreign company (or companies) and no related US entity. In such a case, the relevant US immigration laws and regulations provide for the following special route to US permanent residency through business expansion:

1.) Establishment of a new, qualifying US organization;

2.) Transfer of a Director from the foreign company to the new US organization, via an L1 visa, to develop and direct the start-up operations, including the staffing of the organization; and

3.) Petition for Permanent Residency for the Director and his or her dependents.

The entire process from initial transfer to US permanent residency status, if properly and expeditiously handled, may take as little as 1.5 years to complete. In the interim, both the foreign company and the US company must continue to trade in earnest.

While the size or the turnover of the foreign company is not directly relevant to the granting of the initial L1 transfer visa, only those businesses or organizations that lend themselves to a corporate structure are likely to be found to be qualifying organizations. This usually rules out retail business and restaurants, unless the parent organization owns and operates multiple units from its corporate offices.

Likewise, while the US subsidiary or affiliate need not mirror the foreign company in its business activities, it must also lend itself to a corporate structure to be considered a qualifying organization. Thus, if a foreign company's goal is to transfer a director to the United States - either temporarily or permanently - we are of the opinion that it should steer clear of retails shops and restaurants.

The ease of the above-specified process has recently led some USCIS Service Centers to raise concerns regarding the bona fides of some of these business expansions, especially those originating outside of Western Europe. These concerns are expressed in the issuance of lengthy Requests for Evidence (RFEs), which request copies of corporate minutes and resolutions, as well as feasibility studies evidencing that the business expansion plan reasonably preceded the initial transfer petition. Thus, it is recommended that one allow no less than 90 days to properly law the groundwork prior to the filing of an expansion petition with USCIS.

By: Orlando Ortega-Medina
For more information please contact Ortega-Medina & Associates, http://www.ortega-medina.com.

Orlando Ortega-Medina is lead counsel for the U.S. business immigration law firm of Ortega-Medina & Associates, headquartered in San Francisco, California. The firm also maintains an EU gateway office in London, UK. Mr. Ortega-Medina has particular expertise and insight into complex L1 visa and E2 visa cases, and is frequently engaged by other counsel to troubleshoot visa denials.

If you're reading this, you've most likely been denied for Social Security Disability benefits. And, you most likely are faced with the decision of whether or not to appeal. Here we will talk about what will happen if you appeal, and the benefits of doing so, as well as what will happen if you do not appeal and/or start a new disability claim.

If your initial application was denied, in order to appeal you will need to file your Request for Reconsideration (in most states). What you should know is that Social Security denies most initial disability applications (up to 75% in some states), so you are not alone. Some applicants, discouraged by the denial, give up. Others allow the 60 days to expire before deciding they want to appeal the decision and keep trying, but it is too late. The only exceptions to the appeal period are if the appeal was sent before the 60 days and got lost in the mail or wasn't received by Social Security in time, or perhaps if an emergency has arisen. Otherwise, if you wait until the 60 days are up--too bad. You start all over.

If you decide to appeal and file your Request for Reconsideration, your file will be sent to the Disability Determination Services, at which point your medical records may be requested from your doctors. You may be sent to see Social Security doctors if you haven't seen one in awhile, or simply for a second opinion. With all the work Social Security does at this point, you would think that your chances of being approved would increase. But unfortunately, even more are denied at this level than at the initial level. If you receive a denial at the Reconsideration level, APPEAL.

The reason you are so strongly encouraged to appeal is because the next step is the hearing level. The disability hearing is your greatest chance of being approved. Social Security will assign an Administrative Law Judge to hear your case, and will choose a date and time for you to appear before him. Then the judge can see you, evaluate your disability, and make a determination. If you have a disability attorney, your chances of being approved at this level are excellent. If you are unrepresented, your chances are still good if you are prepared. Unfortunately, while the hearing level has the greatest possibility of success, it also has the longest wait. Many applicants wait a year or more to have their Social Security Disability hearing scheduled. Meanwhile, those who are truly disabled may be living with friends or relatives, barely scraping by. This is one circumstance that the Social Security Administration is trying to change.

Once you receive the decision from the judge, and if it is unfavorable, you have another choice to make. The next appeal is a very long one, and the chances of being approved at that level are low. Sometimes your disability case is remanded back to the judge to review again, often with the same result. Another option is to start another claim, or even start your new claim while the first is pending at the appeal, if allowed by your state. It is possible that the new disability claim may be approved before the first, or at least you may get a different judge at the second hearing. Again, though, the problem is the long wait.

No matter what point you are at in the Social Security disability process, the recommendation is to APPEAL. Do it quickly. Show that you are sincere in your efforts, and don't be discouraged when your disability claim is denied, which it probably will be at least once. Perseverance is the most important factor if you are seeking Social Security disability benefits. Best of luck.

By: Becca Rode
Becca has been involved in the Social Security world since 1995 and enjoys watching the program change peoples' lives.

Contributed by:
Stan Warner
Attorney Directories