we have a client that is asking advice on his DB plan. He is a sole proprietor (100% owner) of a psychology practice and has a DB plan in place. He wants to purchase a nursing home with plan assets. He would be 100% owner of that, too. Is this permissable? and if it is , does this create a control group or common control situation where he needs to cover ee's of the nursing home? or would the nursing home just be an asset of the plan?

thanks for any help...

It is a prohibited transaction for a 10% or more owner or a fidcuiary to use plan assets for benefit of his own account. There may be a way for the plan to purchase the nursing home if an independent fiduciary makes a written determination that the asset would be acceptable for the plan. Of course the owner would have to pay for such a deterimination or have a fidicuary manage all the assets of the plan. If he owns 100% of both his practice and the nursing home there would be a controlled group for benefit purposes for all non union employees.

would it still be a PT if he was the only participant in the DB plan?

Assuming you get over all the other problems, the income from the nursing home business could be taxable to the plan, depending on the form of organization of the business and the actual property that the plan owns.

i'm interested in greggi39's question as well because the owner is the only participant in the plan....

While a single employee DB plan is exempt from ERISA if no common law employees are in the plan, the PT rules of IRC 4975 apply to any qualified plan. The PT rules of IRC 4975 apply to IRAs as well.