I have cash and partner has money in 401k pretax. Best tax strat?

[Will Stahl]

Hello everyone,

I've been digging through the forums and have found a lot topics on investing with retirement accounts but my situation is slightly different so I felt it called for a new post on the subject.....

My father has just retired at the age of 60. He just rolled his employer 401k into his personal Fidelity 401k. All of the money is pre-tax. I am 26 and have all of my money post tax. We want to go 50/50 but given that my money is post tax and his is pretax in a retirement account brings up a lot of questions for me. Here are some more details...

I'm currently buying a three-family property in an LLC. My father wants to put up half the money and be involved. Our concern is that if he wants to contribute, lets say 40k, that he would have to withdraw considerably more than that due to the tax hit.

• Is there a way he can do this without having to pay taxes - or at least pay very little?  
• Can he / Should he invest in my LLC while keeping the money in his 401k? Could his half goes back into his retirement account tax free and my half I pay taxes on and can access?
• Should his name not be on the LLC and rather he be an investor to the llc rather than a partner of the llc?

Thanks in advance for the help everyone. Please let me know if you need more information. 

Thanks,

Will

[Basit Siddiqi]

@Will Stahl

You should look to see if what you are doing is a prohibited transaction. Having an individual invest directly into a family member's dealing using a retirement account may be considered a prohibited transaction.

Furthermore, he would need a self-directed account. I dont think fidelity will allow such features.