[eteeruel]

i am looking to buy a motel in mt with my retirement funds from a 401a plan. I would be buying the stock in the corp. Am i allowed to do this with out getting hit with a tax of 20% and since i'm only 57, getting hit as well with a 10% penalty ?

[ebaines]

To make this investment you are going to have to pull money from the 401(a), and in general this will subject the withdrawal to income tax and possibly the 10% early withdwrawal penalty. One possible exception to the penalty: if you were separated from service from the sponsoring companyy at age 55 or later.

It may be possible to roll the 401(a) monies to an IRA account that in turn invests in this hotel property. If it's done right this would avoid both income tax and penalty (for now). However, investing an IRA in real estate is incredibly tricky and rife with traps that can trigger both penalty and income tax. And it causes you to lose the tax advantage of holding real estate (mortgage and real estate tax deductions, for example). Here's an interesting article that lays out the pros and cons:

Invest Your IRA in Real Estate?