Solo 401(k) Question

[Dawn Anastasi]

If you use your Solo 401(k) to purchase real estate, I understand that there are certain prohibitions on it, such as all income must go back into the property.

As far as hiring people to work on the property, from what I read there are disqualified persons and non-disqualified persons.

A "friend" is listed as a non-disqualified person. A "spouse" is a disqualified person. What about a significant other?

[Steven Hamilton II]

Originally posted by @Dawn Anastasi:

If you use your Solo 401(k) to purchase real estate, I understand that there are certain prohibitions on it, such as all income must go back into the property.

As far as hiring people to work on the property, from what I read there are disqualified persons and non-disqualified persons.

A "friend" is listed as a non-disqualified person. A "spouse" is a disqualified person. What about a significant other?

Dawn,

A significant other as long as not married to or part of your direct lineage is just fine. Cannot be related.

All of the income much go back into the 401k.

Just don't hire family.(to make it simple)

[Dawn Anastasi]

I would think that if people have significant others, they are not part of one's direct lineage!

[Steven Hamilton II]

Originally posted by @Dawn Anastasi:

I would think that if people have significant others, they are not part of one's direct lineage!

Dawn,

I've seen some really messed up things before.

[Dmitriy Fomichenko]

Let's define Disqualified Persons – this means you, as the account owner, your spouse, your parents, grandparents or other ancestors, as well as your children, grandchildren, or other descendants, as well as the spouses of any of these persons. So, for example, your step-child would not be a Disqualified Person, as long as you haven't adopted the child. In addition, your siblings aren't Disqualified Persons either, nor would “significant other”. So technically, one of these people could transact business with your Solo 401k - as long as there is no other reason to prohibit the transaction.

The problem is, if you (or another Disqualified Person) benefit directly or indirectly from a transaction with the Solo 401k, the transaction is prohibited – no matter who the person is that you’ve transacted with.

[Daniel Dietz]

I think part of what Dmitriy is pointing out in his last paragraph is this, to put it onto an actual Iscariot; Say you hired your SO (which is fine) and he fixes up your building (which is fine). What if THEN, after the fact, he ends up buying it (still fine) but then YOU want to move into the building your SDIRA held? Not fine! A 'grayer' area might be if you lived together and you hired him and payed him from your SDIRA, and part of his pay came back into your joint household to pay the bills. Probably not fine. Just trying to put it in an easy to understand form.

Dan Dietz

[Steven Hamilton II]

Originally posted by @Daniel Dietz:

I think part of what Dmitriy is pointing out in his last paragraph is this, to put it onto an actual Iscariot; Say you hired your SO (which is fine) and he fixes up your building (which is fine). What if THEN, after the fact, he ends up buying it (still fine) but then YOU want to move into the building your SDIRA held? Not fine! A 'grayer' area might be if you lived together and you hired him and payed him from your SDIRA, and part of his pay came back into your joint household to pay the bills. Probably not fine. Just trying to put it in an easy to understand form.

Dan Dietz

Dan,

The last part you mentioned would trigger the prohibited transaction.

[Phil G.]

One note of caution on significant others. While unmarried partners aren't disqualified persons because of their relationship with you, if they are a beneficiary of your plan (which is my situation), they become off-limits.