QUESTION:
I would like to place a gas lease in the Solo 401k. The original lease expired, and we are about to sign a new one.
No drilling has been done, so the current value is uncertain. Is it possible to place this in the 401k as a contribution?
If that didn’t work, could I purchase it from my Dad within the 401k?
ANSWER:
Good question. While a solo 401(k) can invest in gas leases, gas lease cannot be deposited into the solo 401(k) as contributions.
Also because your dad is considered a disqualify party, your solo 401(k) cannot buy a gas lease from him.
In order for solo 401(k) to invest in a gas lease, it would have to be purchased from a third-party that is not considered a disqualified party. Click here to see a list of qualified and disqualified parties.
What is more, your father cannot sell a gas lease to a third-party party and then the solo 401k plan purchases the gas lease from the third-party. This is known as a straw-man transaction which is also a prohibited solo 401k investment.
