Self-directed Checkbook IRA LLC Question Answered – How to purchase real estate with my IRA LLC?

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Self-directed Checkbook IRA LLC Question: You helped me set up a self-directed IRA with Forge Trust and I have successfully pulled money into the IRA LLC’s checking account. I even have a home under contract, but having some issues with the lender understanding how to process. Is it possible for the home to close under my name and I transfer the title to the IRA LLC? 

RESPONSE:

The rules require the following:

1. Offer in the name of the IRA LLC.

2. Escrow funding and the the purchase process have to flow from the IRA LLC bank account directly to the title company.

3. Title has to be taken in the name of the IRA LLC.

4. Income and expenses have to flow through the IRA LLC bank account.

Self-employed 401k FAQ: Can I transfer my client’s Solo 401k at Fidelity to Schwab where I custody?

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Self-Employed 401k Question Answered: I am CFP with a client who has a Solo 401k at Fidelity.  I custody at Schwab.  Can you help me with a transfer from Fidelity to Schwab?

RESPONSE:

In short, yes.

We have many clients, whether they’re coming to us directly or through an advisor with an advisor, who have an existing basic plan at a brokerage (e.g. at Fidelity, Schwab, TD Ameritrade, etc.) who wish to upgrade their plan to our plan to take advantage of the services and features that our plan offers (including Roth, Mega Backdoor Roth, 401k loans, 5500-EZ and 1099-R preparation, alternative investments, etc.).

The process to changeover is called a restatement.

One way to understand the process is to think of it as a cut-and-paste where the existing plan documents are replaced with our plan documents which allow the client to do whatever it is that that wish to do (e.g. Roth, loans, etc.).

The client will need new accounts. Those new accounts could be at the same institution but they don’t have to.   Moreover, I note that we will prepare the paperwork to open the new accounts (e.g. paperwork to open new accounts at Schwab Institutional so that the advisor will have access to the account(s)).

ROBS 401k Program Question Answered – Can I buyback the ROBS 401k stock with personal funds?

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ROBS 401K FAQ: I previously started a restaurant franchise with a ROBS 401k.  I recently inherited a significant sum.  Can I use these funds to buyback the stock from the ROBS 401k?

Response:

No – if the C-corporation chooses to do so, the C-corporation (not you) must buyback the shares from the ROBS 401K.

To learn more about how to fund your business tax and penalty-free via our ROBS 401K Business Financing plan, click here: https://www.mysolo401k.net/401k-business-financing/

Self-employed Individual Solo 401k FAQ- How can I use a solo 401k to qualify for 199a tax deduction?

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Self-employed 401k FAQ: Which Solo 401k contributions function to lower my income? I ask because I want to keep my income below the threshold for the 199a tax deduction.

The threshold issue is that in order to set up a Solo 401k, one must be eligible (i.e. self-employed individual with no full-time w-2 employees working for any business owned by such person or a spouse if any).

If the goal is to make contributions to reduce taxable income now, the self-employed owner could make pre-tax Solo 401k employee contributions and/or Solo 401k employer contributions (which employer contributions are always pre-tax contributions0.

For example, for 2022 a solo 401k owner may contribute 100% of his or her self-employment compensation up to $20,500 (plus an additional $6500 if such person is 50 or older) as a pre-tax Solo 401k employee contribution (provided that such person is not making contributions to another plan such as a 401(k) plan that such might have through a day job).

On top of that, if such a person has the self-employment compensation to justify it, the Solo 401k owner may also make an employer contribution equal to 20% of the self-employment compensation provided that the total of all Solo 401k contributions does not exceed the lesser of self-employment compensation or the overall limit (e.g. $61,000 for 2022).

ROBS 401k Program Question Answered – Can I invest my ROBS 401K in bitcoin/crypto and real estate?

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ROBS 401K FAQ: I previously used a ROBS 401k Business Financing plan to buy a FedEx route.  Can I invest the funds in my ROBS 401k in real estate or other alternative investments?

Response:

Investing your ROBS 401K funds in alternative investments incurs certain compliance issues and costs (e.g. you would likely need to obtain a fidelity bond equal to 100% of the value of the alternative investment) such that most ROBS 401K clients who wish to invest in alternative investments will first transfer funds to a self-directed IRA (e.g. our IRA LLC) in order to invest in the particular investment.

To learn more about how to fund your business tax and penalty-free via our ROBS 401K Business Financing plan, click here: https://www.mysolo401k.net/401k-business-financing/

ROBS 401k FAQ – Can I use real estate in my self directed IRA for my ROBS Business?

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ROBS 401K FAQ: I am looking to use a ROBS 401K to start a new car wash.  I already own real restate inside my self-directed IRA.  Can I use this real estate to start the car wash?

Response:

No – you can’t transfer real estate from your self-directed IRA to the ROBS 401k and then transfer this real estate to the ROBS C-corporation for use in the business operations.

To learn more about how to fund your business tax and penalty-free via our ROBS 401K Business Financing plan, click here: https://www.mysolo401k.net/401k-business-financing/

ROBS 401k Program Question Answered – What happens to my ROBS 401K business when I die?


Please check out this good question from our Daily Live Zoom call. Subscribe to our YouTube Channel to get notifications of our Daily FAQs.

ROBS 401K FAQ: I am considering using a ROBS 401k Business Financing plan to finance the purchase of a laundromat.  What happens to the shares I own via the ROBS 401K when I die? What happens to the shares that I own personally?

Response:

As part of the ROBS 401k establishment process, we will provide a beneficiary election form where you can designate what happens to the 401k plan assets when you pass away.  The distribution of your personal assets (including the shares that you own personally) will be governed by your own personal estate plan.

To learn more about the ROBS 401k process: https://www.mysolo401k.net/401k-business-financing/401k-small-business-financing-process/

Self-directed Solo 401k FAQ – Can my solo 401k obtain a non-recourse real estate construction loan?

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Self-directed Solo 401k Real Estate Question: I’d like to purchase raw land to develop homes with my solo 401(k). Is it possible to obtain a nonrecourse loan for construction costs?

RESPONSE;

Great question as investing in real estate is one of the top reasons that clients open accounts with us (and many also obtain a non-recourse loan for their Solo 401k).

In our experience, the companies that specialize in providing nonrecourse loans to retirement accounts won’t provide a nonrecourse construction loan.

In other words, the lender wants to be sure that the investment property is generating a return that can be used to pay back the loan within a shorter time frame.

Self-directed Checkbook IRA LLC FAQ – How can I invest my Fidelity IRA in alternative investments?

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Self-directed Checkbook IRA LLC FAQ: I’m thinking of setting up a Roth IRA, LLC to invest in promissory notes. Can I just invest funds in my Roth IRA Fidelity in the IRA LLC?

RESPONSE:

It will first be helpful to review the IRA LLC structure.

First, one needs to roll over his or her funds (and/or make contributions) to an IRA at a specialty IRA trust or custodian that will allow you to invest in a brand-new LLC.

For those individuals who are not eligible to set up a solo 401(k) (e.g. because such individual is not self-employed, or maybe they are self-employed, but their business has full-time W-2 non-owner employees working for it such that they’re not eligible to set up solo 401(k) plan, or perhaps such person has funds in a Roth IRA which can’t be rolled over to a solo 401k)

For such individuals who are looking to invest their retirement funds with checkbook control in alternative investments, the IRA LLC would allow them to do so.

The sole member of the LLC is the IRA and the individual is the manager of the LLC such that he or she will have direct checkbook control over the LLC bank account.

With regards to investing funds directly from a Fidelity Roth IRA to an IRA LLC, Fidelity does not allow Roth IRA funds to be invested in an IRA LLC.  As result, one would need to roll over the funds to an IRA at a specialty IRA trust or IRA custodian that offers an IRA that allows for investing in IRA LLC.

Advisor barred by the Securities and Exchange Commission (SEC) for Defrauding Federal Employees

On August 19, 2022 the the Securities and Exchange Commission (SEC) barred Jonathan Dax Cooke, a former broker accused of fraudulently persuading hundreds of current and former federal employees to liquidate their Thrift Savings Plan accounts in order to purchase variable annuities. The variable annuities charged significantly higher fees and provided Cooke with substantial commissions.

The final judgment (a) enjoins Cooke from violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933, and from aiding and abetting violations of the broker-dealer books and records provisions of Section 17 of the Exchange Act; (b) bars Cooke from serving as an officer or director of certain publicly-held companies; and (c) orders Cooke to pay disgorgement of $396,409 and a civil penalty of $103,591.

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