I am following up on some discussion we have had regarding the legality of a non-course loan from my father-in-law

BACKGROUND: I am following up on some discussion we have had regarding the legality of a non-course loan from my father-in-law to my solo 401K to purchase an investment property, given the fact that my wife is a trustee of the 401K. I have discussed this with several CPA’s in the Twin Cities area this week and have been told, similar to what you stated, that this type of transaction would be a very gray area with the IRS.  Most likely, any extensive research on the subject by a CPA or Tax Attorney would not provide the conclusive opinion I am looking for.  I have decided not to purse this type of transaction as it appears the risk of being classified a disqualified transaction is significant.

QUESTION: Would another option be, for me, to open a separate self-directed IRA account with funds that I hold in an IRA, in my name?  Under this scenario, in your opinion, would a loan from my father-in-law remain in the gray area or would it clearly not be considered a prohibited transaction?

ANSWER: Generally, the same prohibited transaction rules that apply to a qualified plan such as a 401k plan apply to an IRA. However, individuals have the option to open multiple self-directed IRAs. As such, those IRA investors looking to be aggressive with their particular IRA investment sometimes will open multiple self-directed IRAs to spread their risk of a grey prohibited transaction because the prohibited transaction rules apply separately to each IRA. 

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Solo 401k Explained
Solo 401k Loan
401k business financing

moving funds from American Express Retirement Savings Plan and American Express Retirement Plan into a Solo 401K

BACKGROUND: You set up a Solo 401k for my wife and I.  She is considering moving funds from her American Express Retirement Savings Plan and her American Express Retirement Plan into her Solo 401K.

QUESTION 1: What would we need to do on our side to get this transaction going?

ANSWER:   We can facilitate the American Express Retirement Savings Plan transfer to the solo 401k plan.  Please obtain their transfer-out form and forward it to us for completion.  The retirement account transfer rules allow for the transfer between retirement accounts while preserving the retirement account tax deferred status.

QUESTION 2: I assume we would have to liquidate her plans to cash and then transfer the cash over?

ANSWER:   Yes the investments would be sold, placed in a cash holding account (often referred to as a Money Market Account) and the funds transferred via a trustee-to-trustee transfer to the solo 401k.

QUESTION 3: How can we tell if the money can be moved tax free...? I am not sure if they plan is on the same level as the solo 401k.

ANSWER:   As long as the pans are qualified plans, which appears to be the case based on the information provided, they can be transferred. This will also be confirmed by reviewing the American Express Retirement Account transfer/distribution paperwork.

Any advice you can give me would be appreciated.

M. in Arizona

Can I create a Solo 401k in my sole proprietorship and roll the sep from the other company into it?

BACKGROUND: I have a SEP in one company (XYZ, Inc.) with two employees

I also have another company (ABC Comp) that was a Limited partnership, but is now a sole proprietorship.

QUESTION: Can I create a Solo 401k in my sole proprietorship and roll the SEP IRA from the other company into it?

ANSWER: First, in order to open a solo 401k, you cannot have any full-time W-2 employees in any of your businesses. See following page regarding the controlled group rules. http://www.mysolo401k.net/solo-401k-controlled-group.html

Only if the above is satisfied may you open a solo 401k and then transfer your SEP IRA into it.

Thanks,

John in Virginia