I am working with a 100% participant directed plan (SDBs) and an active participant wishes to use assets from his plan account to purchase a condo. Does anyone know if there is any reason this woukd not be allowed? Thanks!

Non-qualified plan assets?

No legal reason prevents this investment but you need to check corp bylaws. However, the risks and tax issues involving RE, including obligation to pay property taxes,maintence fees, utilities, liability for personal injury, insurance, etc make ownership of RE in a NQDC complex and unattractive to the employer. Dont know how expenses would be paid by employee under 409A rules for salaray deferral. Also transfer of title would be a taxable event requiring employee to pay income tax at marginal tax rates on the FMV of a capital investment instead of cap gains.

This arrangement needs to be reviewed for compliance with respect to the constructive receipt and economic benefit doctrines.