Can My Business Loan Funds to My Spouse’s Solo 401k Plan?

QUESTION:

My wife has a solo 401k account and would like to flip a house.  Can my business give her a 60% LTV mortgage on the house for her 401k to purchase?  Neither of us would benefit in the transaction vs. using a bank mortgage, but it would make it a quicker deal and the hold period is short.

ANSWER:

Good question. Unfortunately, it would be prohibited for your business to loan funds to your spouse’s solo 401k for any purpose including investing in real estate. Even though the loan would be made with the intention of solely benefiting her solo 401k plan, you and your business are considered disqualified parties from a solo 401k investment perspective. The solo 401k prohibited transaction rules are found under the following code section and this particular transaction would be in violation of the following:

“Lending of money or extending credit between a plan and a disqualified person.”

https://www.mysolo401k.net/self-directed-401k-prohibited-transaction-4975/

However, the solo 401k can obtain a non-recourse loan from other lenders. For a list of lenders that commonly loan funds to a 401k plan, CLICK HERE.

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About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>

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