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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 >>

4 Comments

  1. Posted July 11, 2020 at 10:13 pm | Permalink

    Could you use a solo 401k —> LLC set up to run air BnB’s? Or is this only for long term rentals? Even with long term rentals, how do you handle the costs & business dealings? Through the LLC part? Direct checking account debits, since you can’t do a credit card?

    • Posted July 15, 2020 at 6:52 am | Permalink

      A limited liability company that is funded with solo 401k funds is generally used for investing in long term real estate rentals to produce passive, rental income.

      While the solo 401k owned LLC may be invested in Airbnb rentals, the rental income may subject to unrelated business income tax (UBIT).

      While the UBIT rules are complex and depend on the facts and circumstances, short term rental income earned from real estate owned by a Solo 401k will generally be subject to UBIT if such income constitutes business income.
      While income earned from leasing real estate is typically considered non-business rental income, the IRS has identified certain scenarios where real estate rental income is treated as business income.
      The average period of customer use is 7 days or less.
      The average period of customer use is 30 days or less and significant personal services are provided with the rental.
      See Treas. Reg. § 1.469- 1T(e)(3)(ii)
      As such, if Solo 401k real estate is rented via Airbnb on a short-term basis as described in one of the above scenarios, the income would generally be subject to UBIT.

      The solo 401k funded LLC may obtain a debit card for use in paying for LLC owned real estate expenses.

      Given the volume of activity associated with an AIRBNB, the management would need to be provided by a third-party management company and paid for with funds from the solo 401k funded LLLC.

  2. Posted August 21, 2020 at 7:40 pm | Permalink

    Thanks for the great info. Two questions: (1) If I personally have a property under contract to purchase, may I assign the rights of that Purchase & Sale Agreement to the solo 401k LLC? (prior to ever personally taking ownership). (2) I’m a Realtor and know I cannot take a commission on the transaction – can I simply credit all funds to reduce the Purchase Price at closing? In other words, it would show up as credit to the Solo 401k LLC on the closing statement and I never receive any funds personally. Thank you!

    • Posted August 24, 2020 at 5:20 am | Permalink

      1. Assuming no funds have yet been put down (e.g., the earnest deposit) and the property is not currently owned by your family members (e.g., children, parents, spouse, etc.), you will want to work with the title company to redo the purchase documents. On the other hand, if any funds have already been put down, you run the risk of running afoul with the solo 401k prohibited transaction rules such as the following: “Sale, exchange, or leasing of property between a plan and a disqualified person.”
      2. You are technically a disqualified party since your are the participant of the solo 401k that in turn is the member of the LLC, so whether you receive a commission or not, you should not be the acting agent for the real estate transaction.

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