I would like to place a gas lease in the Solo 401k

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.

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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