Rookie SD 401k Real Estate Investment Questions

Looking to purchase a property with my SD 401K account funds. Since this will be my first time, want to make sure is done right.

  1. My wife is a real estate agent and was wondering if since commission paid is taxed, although comes from my Solo 401K to purchase, would she be able to collect commission?

ANSWER:

This confirms that your spouse may not receive a commission on account of the purchase of real estate buy your solo 401k.

  1. If there is a gain when selling, goes right back into tax deferred Solo 401K and is not reported as capital gain, correct?

ANSWER:

This confirms that the gains on the later sale of the property must flow back to the solo 401k and will do so on a tax-deferred basis (i.e. no capital gains).

  1. Do we need to fill out a form and send to you as the custodian?

ANSWER:

This confirms that we are not the custodian of your solo 401k. Instead, you hold the documents related to solo 401k investments as the trustee of the solo 401k.

Please see more information below:

Your Solo 401k can invest in real estate subject to the following requirements:

  • Real estate investment procedures: https://www.mysolo401k.net/solo-401k/solo-401k-real-estate-investment-procedure/
  • Please keep in mind that you can’t work on the property yourself and if you do a high volume a fix and flips (e.g. more than 2 per year) the IRS may attempt to tax as a business (Unrelated Business Income Tax).
  • The property must be purchased from an unrelated person and then sold to an unrelated person.
  • You can’t lease the real estate owned by the Solo 401k to you or any other related persons.

About George Blower

I have the privilege of educating our clients about our products and services so that they can make informed and confident decisions about their financial future. Prior to joining My Solo 401k Financial, I served as the general counsel for a subsidiary of a Fortune 500 financial services company. Learn more about George Blower and My Solo 401k Financial >>

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