QUESTION: I would like to buy an exotic car in Honolulu in the solo 401k Trust name, and have the dealer consignment contract to rent it to the tourist, is this legal? It is very lucrative, as usual all proceeds would be put back into the solo 401k Trust.
ANSWER: Unfortunately, the IRS regulations surrounding retirement accounts, whether a self-directed IRA LLC or a solo 401k, do not allow for the investment of retirement funds in cars, whether exotic or not. Other types of disallowed investments in retirement accounts include alcohol, works of art and jewelry such as diamonds and emeralds.
An alternative, however, would be to have the solo 401k act like the bank by loaning money to the dealer in a form of a promissory note. To learn more about the promissory note rules, click here.
Anthony in Arizona