Sounds like a no-brainer, yet it's a fact: If you are an IRA account holder, you cannot borrow money from your retirement plan to buy a home for yourself--or to help a child or grandchild buy a home- -without paying federal income taxes. Yet most Americans who participate in employer-sponsored 401(k) retirement plans can readily pull out cash tax-free any time to help a relative buy a home.

To deter such abuses, Congress imposed not only a 10 percent penalty on most "premature" withdrawals (before age 59 1/2) from IRA accounts, but also required account holders to pay income tax at their regular rate on the amounts withdrawn. Other types of retirement accounts, including private-employer 401(k) plans and the federal government's own retirement-savings plans for its employees, traditionally have allowed penalty-free borrowing by participants up to specified dollar limits.

In 1997 Congress moved part of the way toward rectifying the disparate treatment of IRA accounts by eliminating the 10 percent penalty for IRA holders who withdraw up to $10,000 for a home purchase. But IRA holders who make home-related early withdrawals still have to pay income tax on whatever they take out.