Same Property Rollover Rule Applies to IRAs Not to Solo 401k Plans

QUESTION

I distributed a rental property from my IRA with Equity Trust. I then sold the rental property and would now like to rollover those proceeds to a self-directed solo 401k plan. Can I do this? It has not been 60 days since I distributed the property form the IRA and then sold it. This is the first distribution I have taken from all my IRAs in over 3 years.

ANSWER

The rules require that if property is distributed from an IRA, the same property must be rolled over. The IRA owner may not sell the property and substitute cash in the rollover. Therefore, because you distributed the property in-kind from the IRA–that is, the property was assigned to you from the IRA, which you then sold, you cannot rollover the cash proceeds to a solo 401k plan or even back to the same IRA or another IRA.

The same property rule also applies  if you take a distribution from the IRA and then use the proceeds to purchase a property. You cannot then attempt to rollover the property to an IRA or a solo 401k plan even if within 60-days. Under the Same Property Rule, the same property that is distributed from the IRA must be the property that is rolled back to the IRA or a solo 401kplan in order to count as a 60-day distribution.

 

Solo 401k Plan Exception

However, the same asset rule does not apply to distributions from employer plans including a solo 401k plan.  In other words, if the rental property were held in your solo 401k plan, you then distributed the rental property from the solo 401k and then sold the property to a third-party, the cash proceeds can be transferred to an IRA and still count as a 60 day rollover.

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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