Full In-Plan Roth Solo 401k Conversion of Real Estate Held in Pretax Solo 401k Account

After verifying with your solo 401k plan provider that the plan allows for in-plan conversions, the next step is to convert the real-estate property held in the pretax portion of the solo 401k to the Roth solo 401k (Roth designated account).

Here are the typical steps that apply to an in-kind, in-plan conversion of a real-estate property held in a self-directed solo 401k:

  1. Get the property appraised: Federal taxes and possibly state taxes will be due on the amount converted. Therefore, it is important to have the property appraised by an independent third-party property appraiser in order to determine the value of the property subject to taxes.
  2. Grant the property: Once appraised, grant the property from the pretax solo 401k to the Roth solo 401k.

For example: If  title to the property reads as follows:

Joe Smith, Trustee of ZYX Trust

The new titling would be as follows after the conversion: Joe Smith, Trustee of ZYX Trust (ROTH)

3. Fill out the conversion form: The solo 401k provider will need to issue a Form 1099-R by February of the following year to report the taxable conversion to the IRS.

4. Open a separate solo 401k bank account: If you have not yet opened a separate bank account under the solo 401k plan to hold the Roth solo 401k funds, make sure to do so as all the income and expenses associated with the Roth solo 401k owned real-estate property will need to be accounted through that account.

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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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