Good Solo 401k Contribution & 401k Real Estate Investment Questions

QUESTION 1. Is the form 5500 due 4/15 or Oct if extension for filing tax return is filed?

ANSWER: As provided in IRS Publication 560, the annual solo 401k contribution is due by the tax return due date plus extensions provided an extension return was timely filed.

QUESTION 2. I have invested the funds in (paid in full) real estate residential rentals.  Since they were purchased in Nov – Dec 2012, do I use the purchase prices as the value for form 5500, or must I obtain an independent valuation?

ANSWER: First, Form 5500 EZ is only filed if the total value of your solo 401k hit $250,000 or above as of 12/31, if not, then a Form 5500EZ does not need to be filed. Form 5500 EZ for the solo 401k if due/must be filed with the IRS by the end of July. Second, because the real estate was purchased in December, I would imagine that the value did not change in less than 30 days. Therefore, an appraisal may be a waste of money.

QUESTION 3. Can I make cash purchases for repair items, and use those purchase amounts as a contribution, or must all expenses be paid via check or debit card on 401k bank account?

ANSWER: Absolutely no you cannot make cash purchases for repairs and treat them as solo 401k contributions. Instead, provided you have self-employment income from the business for which the solo 401k was established, you first have to make a cash solo 401k contribution. Subsequently, the solo 401k funds would be used to cover expenses associated with the real estate asset.

QUESTION 4.    Please confirm that I can do minor work on the premises, providing I do not get paid for the work.

ANSWER:  No you cannot do any repairs, whether minor or major, paid or non paid on the solo 401k real estate investment as you are a disqualified party. Doing so would result in a solo 401k prohibited transaction.

QUESTION 5.  What is a good publication for rules regarding a Solo 401k plan?

ANSWER: The following contain rules applicable to 401k plans including solo 401k.

Click on IRS Pub 560

Click on IRC 4975:

QUESTION 6.  When is the cutoff date for contributing to the Solo 401k?  Can the contributions be made in a lump sum prior to the cutoff date, or is there a requirement for periodic contributions?

ANSWER:  See answer above to question 1 for solo 401k contribution due date. Yes annual contributions to a solo 401k can be made periodically or annually.

Thanks very much

LK form Florida

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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