Solo 401k Duplex Investment Question

BACKGROUND: I have a solo 401k investment scenario for you.  A person who has a solo 401k buys duplex on a tax lien auction and the duplex needs work to be put on the market as a rental.

QUESTION 1: Do the rehab expenses get paid for by the solo 401k?

ANSWER: Most certainly. Why? Well, because the duplex is a solo 401k asset. Therefore, only solo 401k proceeds may be used to improve the duplex property.

QUESTION 2: Can the person whose solo 401k it is ever partially or temporarily occupy the property?

ANSWER: No because the solo 401k owner/participant falls under the solo 401k disqualified person category. Occupying the property–even if rent is paid—would fall under the following specific prohibited transaction description found in I.R.C. 4975:

Furnishing of goods, services, or facilities between a plan (e.g. Solo 401k plan) and disqualified person.

I appreciated,

Barbara in Minnesota

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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