Question: My wife and I have a Solo 401k that is invested in a rental property. The house that is in the trust has a positive cash flow of $550.00 per month. Each month we put aside $100.00 for future maintenance and repair costs, along with payments to our property manager. Could you please tell me how much compensation would be reasonable for my wife and I to receive as the two trustees of our trust?
Answer: You are not allowed to personally receive compensation as result of your Solo 401k investments. This is because you are a fiduciary of the Solo 401k plan. A fiduciary is prohibited from using his/her fiduciary authority, control, or responsibility to cause the Solo 401k plan to compensate such fiduciary. Here, you have exercised your authority and control over the Solo 401k plan to invest in real estate. For you to then receive compensation from the proceeds of that investment would constitute a prohibited transaction.
For more information regarding the self-dealing rules applicable to Solo 401k Trustees click HERE.
For more information on prohibited transactions click HERE.