QUESTION: Is it allowable for the Self-Directed Solo 401K to purchase a
San Antonio, Texas real-estate investment property owned by us? Or does
that trigger the unfair advantage rule?
I have a rental in San Antonio, TX that is underwater on the 2nd and I’m trying to decide whether to negotiate down the 2nd and take money out of the Solo 401K plan in order to pay the lender, and then have the Solo 401k purchase the property from us. If that doesn't work I'll have to short sell it. I want to keep it if I can; this is so hard to figure out!
I have a rental in San Antonio, TX that is underwater on the 2nd and I’m trying to decide whether to negotiate down the 2nd and take money out of the Solo 401K plan in order to pay the lender, and then have the Solo 401k purchase the property from us. If that doesn't work I'll have to short sell it. I want to keep it if I can; this is so hard to figure out!
ANSWER: Unfortunately, if
your Solo 401k plan were to purchase
your San Antonio, Texas owned real estate property, it would be a prohibited
transaction because you fall under the disqualified party category. Similarly,
your spouse, your parents, your children, your grandparents and anyone
providing services to your Solo 401k also falls under the disqualified party
umbrella. For a full list of disqualified and non-disqualified parties visit: http://www.mysolo401k.net/Investments.html
The purchase or the transfer to of your personally owned
real estate to the Solo 401k specifically falls under IRC 4975 code section detailing
the following: “The sale, exchange, or lease of
property between a plan and a disqualified person.” The plan obviously being
the Solo 401k and the disqualified
party means you as trustee of the Solo 401k.
Visit following links
to learn more about the Solo 401k prohibited transaction rules.
No comments:
Post a Comment