In-Kind Roth Solo 401k Conversion of Solo 401k Owned Real Estate with Outstanding Non-Recourse Loan

For a real estate property owned by the pretax solo 401k where there is an outstanding non-recourse loan, the following applies prior to processing the in-kind conversion of the property from the pretax solo 401k to the Roth solo 401k. 
1. Have the property appraised by a third-party valuation provider. 

 2. Then subtract the outstanding non-recourse loan from the fair market value of the property. 3. The value of the property for conversion reporting purposes will be the net value after subtracting the non-recourse loan. 

Example: The value of the real property held in Jane’s pre tax solo 401k is $100,000 after having it appraised by a third-party valuation provider. The solo 401k owned real property also has an outstanding non-recourse loan amount of $25,000. After subtracting the outstanding non-recourse loan amount, the market value of the property is now $75,000 ( $100K – $25K). Therefore, the value to report on the Form 1099-R for the in-kind conversion of the real property to the Roth solo 401k is $75,000. 
Note: The ongoing non-recourse loan payments will now need to be paid with funds from the Roth Solo 401k since after the in-kind conversion the property is now owned by the Roth solo 401k.

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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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  1. Posted December 23, 2021 at 8:58 pm | Permalink

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