Jose R. Villavicencio, 635 B.R. 486

Debtor Jose R. Villavicencio was sole member of JRV SEPIRA LLC, which owned and was acquiring rental real estate, including 3339 Daglow Road (the Daglow Property) via a recorded land contract.
Villavicencio lived at the Daglow Property when he filed his Chapter 7 petition on May 1, 2019.
In March 2017 Villavicencio withdrew $243,537.67 from a Madison Trust–administered SEP IRA and transferred most of the funds into a bank account and then into the LLC to buy real estate; the LLC held title/contract rights to the Daglow Property.
On Schedule C Villavicencio claimed two exemptions in “Madison Trust (JRV SEPIRA LLC)” — (1) a homestead exemption in the Daglow Property under Ohio Rev. Code § 2329.66(A)(1)(b) and (2) an IRA exemption under § 2329.66(A)(10)(c).
The Chapter 7 trustee objected: (a) the homestead exemption is improper because the LLC — not Villavicencio personally — owned the property; (b) the SEP IRA was not exempt because Villavicencio’s residence/use of an IRA-held property was a prohibited transaction under I.R.C. § 4975, which causes the account to lose tax-exempt IRA status under I.R.C. § 408(e)(2)(A).
Villavicencio conceded the prohibited-transaction violations but argued Ohio’s good-faith savings clause (§ 2329.66(A)(10)(g)) preserves the state IRA exemption. Court sustained trustee’s objections and disallowed both exemptions.

Issue	Plaintiff's Argument (Trustee)	Defendant's Argument (Villavicencio)	Held
Whether debtor may claim Ohio homestead exemption in property owned/being purchased by his LLC	Debtor lacks an interest in the Daglow Property because title/contract rights are held by the LLC; homestead exempts a person’s interest only	Debtor asserted a beneficial interest (invoked Starr), effectively claiming the residence exemption	Exemption disallowed — membership in LLC does not create an exemptible interest in company property; property interest belonged to the LLC
Whether SEP IRA is exempt under Ohio law despite prohibited transactions	Use of IRA assets (via LLC property used as debtor’s residence) was a prohibited transaction under I.R.C. § 4975, so the SEP IRA lost IRA status under I.R.C. § 408(e)(2)(A) and is not exempt	Debtor conceded prohibited transaction but contended Ohio’s § 2329.66(A)(10)(g) (good-faith savings clause) preserves the exemption for errors made in good faith	Exemption disallowed — prohibited transaction caused loss of IRA status; the state good-faith savings clause does not apply because debtor, who controlled the plan assets, acted with indifference and failed to make reasonable efforts to comply with IRC requirements

Stern v. Marshall, 564 U.S. 462 (2011) (core bankruptcy proceedings and constitutional authority to enter final judgment)
Rousey v. Jacoway, 544 U.S. 320 (2005) (purpose of exemptions is to protect a debtor’s fresh start)
In re Roberts, 326 B.R. 424 (Bankr. S.D. Ohio 2004) (an IRA exists only by reason of the Internal Revenue Code; IRC determines IRA status)
In re Bellisari, 554 B.R. 440 (Bankr. S.D. Ohio 2016) (prima facie validity of claimed exemptions and burden-shifting on objection)
Ellis v. Comm’r, 787 F.3d 1213 (8th Cir. 2015) (I.R.C. § 4975 prohibited transactions include transfers or uses of plan assets for a disqualified person even if made in good faith)
United States v. Hendrickson, 822 F.3d 812 (6th Cir. 2016) (good-faith defense requires a genuine effort to comply with governing law)
Thom v. Am. Standard, Inc., 666 F.3d 968 (6th Cir. 2012) (good-faith inquiry requires honest intent to ascertain and follow legal requirements)