Sell Part of Solo 401k Owned Investment Property to an LLC

Question regarding purchase of property:

I purchase an investment property (house, barn and acreage) through my Solo 401k.

I subdivide the property in order to keep the house/barn in the Solo 401k (as a rental unit) and sell off the acreage.

Can I sell the acreage at Fair Market Value to an LLC I own, or am I required sell to a completely independent/unrelated third party?

Answer:

Unfortunately the solo 401k rules do not allow for such transaction because it is your solo 401k and LLC. As such the solo 401k would need to sell the property to an unrelated third-party.

Also, the solo 401k could now sell the property to a third-party and then have the third-party sell it  to you as this would still be prohibited since it would fall under a straw man/roundabout transaction. In other words, you can’t do indirectly what can’t be done directly. The prohibited transaction rules are outlined in IRC 4975 and ERISA Sec. 406.

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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