QUESTION: In several places on your website, you write about a TIC where the 401k can own a share of a real estate QUESTION: investment. In your definition of TIC, you write ” This type of arrangement also permits you to invest your Solo 401k with family members such as your spouse or siblings.” Elsewhere, though I believe that a spouse might be a prohibited party. If I want to use cash from my solo 401k to be a 1/3 owner in a rental condo with my husband (who is also my 100% primary beneficiary) who would own the other 2/3rds, would that be allowed?
Thanks, Dian in NC
ANSWER: Provided the real estate purchase is processed simultaneously, no debt financing is used and each party’s percentage of ownership is separately reflected on the real estate purchase documents including the recorded deed, disqualified parties can co-invest with their solo 401k (also known as self-directed 401k because it can be invested in real estate) in the same real estate property. However, if all three of aforementioned requirements are not satisfied, it will be considered a prohibited transaction. Further, none of the disqualified parties would be able to use the real estate property for their own benefit and all expenses and profits would flow from/back to the respective investors based on their percentage of ownership in the real estate property.
To finish answering your question, based on the foregoing any three parties can own the real estate.
Lastly, please click on Solo 401k tenants-in-common to visit our sister website containing more information on TIC.