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. Yes, the solo 401k rules do allow for the investing solo 401(k) in investments offered by apps such as Ground Floor or 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.
