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Self-directed Solo 401k Question: Sometimes it is desirable to do a Roth Solo 401k conversion when affordable. Can I convert my promissory note investment to my Roth Solo 401k?
Good question – effectively this question is asking about an in-kind in-plan Roth Solo 401k conversion. Items to Consider if You Plan to Process a Self-Directed Roth Solo 401k Pretax In-Plan Conversion in 2022 – My Solo 401k Financial
There is no triggering event to do in plan Roth conversion. Such conversion could be of cash or it could be a conversion of assets such as a promissory note.
The additional wrinkle when you’re transferring over or converting an asset in-kind via an in-plan Roth conversion is that you need to know the value of that asset and so would certainly need to have third-party documentation of the value because that’s the amount upon which there will be a tax obligation.
Just like when one converts cash from a pretax account to a Roth account and the amount of such cash is taxable, the same rules apply with respect to an asset that is being converted in-kind from a pre-tax solo 401k sub-account to a Roth Solo 401k sub-account.