While a regular solo 401k plan provider such as Fidelity Investments, Charles Schwab and E-TRADE limit investments to stocks, bonds, index funds, etc., a self-directed solo 401k from a provider such as My Solo 401k Financial allows for investing in nontraditional investments including oil and gas rights. Holding mineral rights means your self-directed solo 401k owns the mineral content beneath the surface.
With oil and gas royalties in a self-directed solo 401k, the plan owns a portion of the revenue that the oil or gas wells produce. The royalties collected from the oil and gas rights flow back to the solo 401k plan. Depending on whether you invest pretax or Roth solo 401k funds, the gains will grow taxed on tax deferred basis or tax free, with Roth solo 401k distributions being tax free at retirement. The gains on the oil and gas rights will be considered passive not active so UBIT won’t be triggered, because the gas and oil company NOT the solo 401k then extracts and sells the oil & gas. As the investor, the solo 401k can also later sell the mineral rights and the profits would also flow back to the solo 401k plan.
