Solo 401k non-recourse loan question

QUESTION: Thanks for helping to open a solo 401k for my mother.  I had a few questions about who the solo 401k plan can borrow money from with respect to a Solo 401k non-recourse loan for investing in real estate.  Can the solo 401k borrow from:

Their own Self Directed IRA?

Their children's Self Directed IRA?

Thanks,

JK

ANSWER:  While other IRAs can loan funds to a Solo 401k (known as a non-recourse loan) which can then be used towards the purchase of real estate, you still need to be aware of the disqualified party and Solo 401k prohibited transaction rules. Disqualified parties make up the Solo 401k trustee and any of his or her IRAs because the trustee is a disqualified party and any of his or her assets are also considered disqualified. Further, the Trustee’s children (with the exception of stepchildren) and their IRAs are also considered disqualified parties and therefore cannot loan funds to their mother’s Solo 401k plan. However, other parties not considered disqualified, such as your mother’s brothers and sisters, her stepchildren, her aunts and uncles and cousins as well as friends, can either loan their personal funds or their self-directed IRAs to your mother’s Solo 401k through a non-recourse loan and used for the purchase of real estate in the name of your mother’s Solo 401k.