QUESTION:
Is it OK for me to do the following transactions?
- Sell a property held in the Solo 401k Trust to a real estate broker.
- Buy that same property back from the broker so that I am holding it personally, not in the Trust.
- Use the funds now available in the solo Trust to buy a different property from that broker.
The broker says transactions 1 & 2 can happen concurrently. I want to make sure the IRS won’t have a problem with this.
ANSWER:
Good question. Such transactions would result in a prohibited transaction because you would ultimately personally purchase a property that was once owned by your solo 401k plan. You can’t own a property was once owned by your solo 401k plan. Such transaction would be considered a roundabout transaction/straw-man. To learn more about the solo 401k prohibited transactions, click here.
