A federal official has panned efforts by a beauty salon supply company owner to use an individual retirement account to help finance the construction of a warehouse.
Louis Campagna, chief of the fiduciary interpretations division at the U.S. Department of Labor, has written a letter, Advisory Opinion 2006-01A, suggesting that the proposed use of IRA assets appears to violate Labor Department regulations governing permitted retirement plan investments.
Debra Buchanan, a lawyer in Tacoma, Wash., filed a request for an advisory opinion on behalf of Salon Services and Supplies Inc., a corporation that is 68% owned by Miles and Sydney Barry and 32% owned by George Learned.
Berry cannot invest his IRA assets directly in Salon Services, because an IRA holder’s own business is a “disqualified person” in connection with IRA investments, Buchanan said. Disqualified persons cannot benefit from an IRA’s income or assets.
Miles Berry wants to get around that restriction by using an IRA to help start a separate company that would buy land, build a warehouse and lease the property to Salon Services, according to a summary of the proposed transaction given in Campagna’s letter.
Berry’s IRA would own 49% of the warehouse company stock, Learned would own 20%, and Robert Payne, Salon Services’ comptroller, would use his own IRA to buy a 31% stake.
Payne and Learned would manage the warehouse company, and Buchanan said Payne and Learned would be independent of Berry, according to the proposal summary.