DOL Opinion Letter 20001-10A Covers Co-Investment Rules Solo 401k

While not well known, it is not always prohibited to invest alongside your self-directed Solo 401k even though you fall under the disqualified party category. What’s more, other disqualified persons such as your spouse, your children and your grandparents also may co-invest with your Solo 401k.

Nonetheless when co-investing with your Solo 401k or even your self-directed IRA LLC, as outlined in DOL Advisory Opinion 2000-10A, the key is to be able to prove to the DOL or IRS in the event of an audit that the transaction could have been consummated without involving your Solo 401k or IRA to avoid deeming the transaction as a prohibited transaction.

For example, if you have additional financial resources that could be used (e.g. another IRA or personal brokerage account), but instead you elected to use your Solo 401k to co-invest with because it was a good investment for the self-directed Solo 401k, it should not be deemed prohibited. The DOL Advisory Opinion 2000-10A letter further warns that going forward a conflict may arise between the IRA and its owner, but it does not provide guidance or fixes.

Furthermore, when co-investing with your Solo 401k, it is important that the transaction takes place simultaneously. For instance, if you find an investment property in Texas that you would like to purchase with your Solo 401k and personal funds, you would need close on the property simultaneously in addition to not purchasing the property from a disqualified party such as yourself or spouse, and no debt may be incorporated.

Additional Information

Solo 401k Fiduciary Defined

Solo 401k Disqualified Person Defined

Outcome of Engaging in Solo 401k PT

​Correcting a Solo 401k Prohibited Transaction

Regulators of the Self-Directed Solo 401k Industry

Additional Information

Investment Fraud

Targets of Investment Fraud

Reasons Solo 401k Plans are Targets of Fraud

Techniques Used by Fraudsters

Tips for Avoiding Fraud

SOLO 401(K)

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