2015 IRA One-Rollover Rule

The one rollover per 12-month period rule that applies to all IRAs in aggregate is discussed in the following court case, announcements and Pub 590.

• Bobrow V Commissioner 

• Pub 590

• Announcement 2014-15

• Announcement 2014-32

IRA 12-Month Rule At a Glance

• One rollover allowed per spouse, per 12-month period

• The 12-month rule does not apply to Roth conversions

When does the 60 day clock start?

• Day one is day after the IRA distribution.

• Rollover is required by the end day 60.

COMPLIANCE NOTE 1: Direct-rollovers and trustee-to-trustee transfers are not affected by the 12-nonth rule.

COMPLIANCE NOTE 2: Qualified plans such as Solo 401k Plans and Defined Benefit Plans are not subject to the one rollover per 12-month period rule.

Partnership stock trading open self-directed solo 401k

BACKGROUND & QUESTIONS:

 My wife and I opened a partnership for stock trading. We would like to open a solo 401k. A few requirements and questions:
1. We want to have the solo 401k in interactive brokers. What type of accounts do we need to open in interactive brokers and what is the procedure to have the account under 401k?
2. We have IRAs in interactive brokers and would like to roll over those IRAs to this solo 401k. How easy can it be done and how long would it take to roll over those IRAs?

Let us know the procedure so we will start doing this and hopefully finish it in these couple of days.


ANSWERS: In order to open a solo 401k self employment is required. The partnership may not qualify as it is not considered earned income but rather passive income.

Please see following page for more on this:

http://www.irs.gov/publications/p560/ch04.html#en_US_2013_publink10008950

Self-employed individual.   You can make contributions on behalf of yourself only if you have net earnings (compensation) from self-employment in the trade or business for which the plan was set up. Your net earnings must be from your personal services, not from your investments. If you have a net loss from self-employment, you cannot make contributions for yourself for the year, even if you can contribute for common-law employees based on their compensation.

Please see following blog about opening a solo 401k brokerage account at Interactive Brokers.

The IRA transfers can take anywhere form 3 to 10 business days, depending on how busy Interactive brokers is.

http://www.mysolo401k.net/solo-401k-brokerage-account-interactive-brokers/

 

ADDITIONAL INFORMATION

1. Fidelity Checkbook Solo 401k
2. Solo 401k Annual Deadlines
3. Solo 401k Do's and Don'ts

I just learned about the Solo 401K option from my CPA

 

QUESTIONS: I just learned about the Solo 401K option from my CPA.  She recommended that I look into switching my self-directed IRA into a Solo 401k plan using my business (I am a sole proprietor) as a tool.   Is this possible?  What are the restrictions?  What are the advantages and disadvantages to make this move?  I currently own an apartment building with my Self-directed IRA. 

ANSWERS: Solo 401k plans are for the self-employed, so if you are a sole proprietor and don't have any other businesses that employee full-time employees other than yourself or business partner, you can open a solo 401k and process an in-kind transfer of the IRA owned real estate property to the solo 401k. The self-directed IRA custodian would report the movement of the property to the solo 401k as as non-taxable direct rollover.

Visit following link to learn more about the IRA to solo 401k direct rollover rules. 

 http://www.mysolo401k.net/solo-401k-rollover-explained-rollover-direct-rollover-transfer-whats-difference/

We would assist you with completing and/or drafting the IRA direct-rollover form.

To learn about the advantages and disadvantages of transferring an IRA to a solo 401k, please visit following link.

http://www.mysolo401k.net/use-solo-401k-plan-instead-self-directed-ira/

Many thanks, 

Amy in Houston Texas

Solo 401k real estate purchase limitation question

BACKGROUND: We are wanting to start investing our self-directed solo 401k trust in rental properties.  Our major concern on the first one is the limitations around buying it within our 401k (we can't do any work on it, have our son mow, etc).  This might not be a big deal for us but it would be nice to have more flexibility while we're learning.

I saw online that we should be able to borrow the lesser of 50k or 50% of our 401k balance personally.  If this is true, we're thinking we could do that and then buy the property under an LLC.  

Our thought is that doing that would keep us from having any prohibited transactions with the 401k and would also allow us to pay interest on the loan back into our 401k to increase its balance.

QUESTION 1: Does this sound right to you or would you have any hesitation in doing it this way?

ANSWER:  You are correct that in order to physically do work on the properties, the properties would need to be purchased outside of the retirement account. Therefore, yes a solo 401k loan would be the solution since the borrowed funds would no longer fall under the solo 401k umbrella. To learn more about the solo 401k loan rules, click here.

QUESTION 2: Secondly, if we did buy another property 50% us and 50% 401k would we, at a later date, be able to buy out the 401k's ownership of it if we wanted to or would we be stuck at 50/50 until the time that we sold the property outright?

ANSWER: The transaction you are describing falls under the tenants-in-common category. Click here  and here to learn more about this type of solo 401k investment transaction. If you as the trustee of the plan partner with the solo 401k to invest in a rental property under a tenants-in-common transaction, you can never buy out the 401k plan’s ownership portion because you are a disqualified party. Other disqualified persons include your spouse, children and parents, to name a few. However, you could take the property out of the 401k as an in-kind distribution and pay the taxes on the solo 401k owned portion (the 50%). So, instead of taking a cash distribution form the solo 401k, you would take the distribution in the form of an asset (the real estate).  The deed would then be recorded to list you or the LLC as the full owner of the property.

I appreciate your incite, 

Donna L. in Seattle Washington

Move money from a 401k to a Roth Solo 401k

QUESTION: I understand I can move money from a normal 401k – including my self-directed one – into a Roth , pay taxes on the monies transferred now, then use that Roth for traditional investments. Is there a way to do the same but not be bound by common investing (stocks, brokerage houses, etc) within that Solo 401k Roth? The investment I have in mind is buying shares in a new company, but the shares are unregistered, non-traded, non-public company shares, which I plan to do with my Solo401k if I cannot find a way to do it within a Roth. (I have done this with my Solo401k in another company for restricted stock shares but that company is Exchange listed and their shares trade on the OTC, as my shares can after the vesting period expires – so a different situation.)

ANSWER: Yes just like Roth 401k funds can be invested in publicly traded companies, the Roth solo 401k may also be invested   in private company shares. The following procedure sheds light on investing in private shares.  The same procedure applies to investing a pretax solo 401k in private company shares.

http://www.mysolo401k.net/Self-Directed-401k-Self-Directed-Solo-401k-Private-Investment-LLC-Corporation-LP.html

Thanks,

Linda in Minnesota