In addition to converting pretax funds held in a pretax solo 401k to the Roth solo 401k, private equity/private placement/Syndicate/private shares held in a pretax solo 401k may also be converted to the Roth solo 401k.
Here are the typical steps that apply to an in-kind, in-plan conversion of a Private Equity Investment (private placement / Syndicate)held in a pretax self-directed solo 401k:
- Get a fair market valuation: Federal taxes and possibly state taxes will be due on the value converted. Therefore, it is important the private investment is valued prior to the conversion in order to determine the value subject to taxes.
- Change Ownership: Once the fair market value is determined, work with the private investment (private placement / Syndicate) sponsor to update their investment offering documents to reflect the Roth solo 401k portion of your solo 401k now owns the shares/units.
For example: If title to the private investment document reads as follows:
Jane Smith, Trustee of ABC Retirement Trust
The private investment documents would be updated to read as follows, for example: Jane Smith, Trustee of ABC Retirement Trust (ROTH)
3. Fill out our on-line solo 401k conversion form if you are a client of My Solo 401k Financial: 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. https://www.mysolo401k.net/pretax-to-roth-solo-401k-in-plan-conversion-form/
4. Open a separate solo 401k bank or brokerage account to hold the Roth solo 401k funds: If you have not yet opened a separate bank or brokerage 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 private investment/syndicate will need to be accounted through that account.
Does the Private Investment Paperwork Change QUESTION
See also the following page for more information.
