Investing Solo 401k Plan in Fundrise (1099-DIV, UBIT)

QUESTION:

I have initiated investing in Fundrise eREIT.  I received this message below.

 

Before I approve investment please confirm that this is an acceptable investment for my Solo 401K.  It is my understanding, that I as the trustee would keep the tax document records, and will not have to report any special forms to the IRS since my total 401k account balance is below $250,000.  Thank you.

ANSWER:

1.       This confirms that is acceptable for your solo 401(k) funds to be invested in investments offered by Fundrise.

2.       Please note that the communication below confirms that a 1099-DIV or K-1 will be issued.  For this reason, it will be important to confirm that the account is set up under the employer identification number (EIN) for the solo 401(k) – since this tax reporting will be with respect to this employer identification number and the employer identification number was specifically obtained for a 401(k) (which means that the IRS knows that the income is flowing to a tax-deferred entity).

3.       Please note that the communication below indicates that “eFunds” investments may be subject to unrelated business income tax (UBIT).  If you will invest in such investments, it will be prudent to discuss this with your tax advisor as your tax advisor will need to file the applicable tax returns (e.g., Form 990-T) in the event that your investment is subject to unrelated business income tax.

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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