Taxes for Solo K investing in MF syndication
Would someone please explain the difference in taxes between investing in MF syndication using Solo K versus using "regular" funds from my checking account?
Let's say I invest $100k in a MF syndication, giving me 20% interest, and I get quarterly distributions, plus when the apartment complex is sold, I get a share of the profit from the sale. Cost segregation is used.
1. If I use my Solo K to invest in the syndication, what taxes would I pay on monthly or quarterly distributions? What taxes would I pay on my 20% share of the profit from the sale -- would the profits be taxed at the UBTI rate of 37%?
2. If I use "regular" money from my checking account to invest in the syndication, then what taxes would I pay on the distributions and the profit?
3. How does taxation change if cost segregation is not used?
Thank you to anyone out there kind enough to help me understand this!
Most Popular Reply
The Solo 401(k) will not be taxed on the income produced by the investment. UBTI is not generated from passive rental income.
The Solo 401(k) grows over time with compounding of the tax-sheltered income, just like it would if it were receiving dividends on a stock investment.
When you personally take a distribution in retirement, you will pay tax on the amount of any such distribution.