Saturday, November 3, 2012

Educating title company attorney on Solo 401k real estate purchase


QUESTION: Educating title company attorney on Solo 401k real estate purchase: I need a reference to the IRS code/law/article that says a solo 401K can invest in real estate and it's eligible to hold a title. Whatever you have a link to the IRS website or other documents is fine.
I need to forward that to the attorney at the title company working on this Solo 401k real estate purchase. This is somewhat urgent. Sorry to put pressure on you but the closing is getting delayed and we are at risk of losing the contract.

ANSWER: Instead of the IRS code stating what investments are allowable, the IRS code details that certain investment types are prohibited, which are listed on the following link. http://www.bradfordtaxinstitute.com/Endnotes/IRC_Section_408m.pdf

You will see that Real Estate is not a prohibited investment.

Prohibited investments include works of art, rugs, antiques, metals, gems, stamps, coins, etc., but not real estate.

Further, your Solo 401k providers Trust Plan Document should list under investments section of the Trust language similar to the following:  "Real and personal property having a ready market value" is an allowable investment under your Solo 401k plan.

If your real estate professionals have any questions regarding the foregoing, please have them call your Solo 401k provider so that their in-house attorney can educate your title company’s attorney as not all attorneys have been trained on the process of self-directed Solo 401k real estate.

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