Solo 401k Roundabout Real Estate Transaction

QUESTION:

Is it OK for me to do the following transactions?

  1. Sell a property held in the Solo 401k Trust to a real estate broker.
  2. Buy that same property back from the broker so that I am holding it personally, not in the Trust.
  3. 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.

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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