Would I be prohibited

Question

Hello,

I am still very new to BP and have found a lot of great information here. Thanks to all. So here is my question.  If I start a solo401 and use that to fund a specific flip with a local RE business can I do other flips with the same RE business with some personal money to put in my personal account. So I am already involved with them with non-retirement can I start another project with some retirement funds? I am not part of their LLC.

Dmitriy Fomichenko · Answer

@Steve Frick

It looks that you are considering using your 401k funds to provide a private loan to a company for a property A that they wish to flip. At the same time you used your personal funds to provide the same company a private loan secured by property B. On the surface this seems to be doable (it would be an issue if it was the same property), but I suggest you discuss the specific with the qualified professional.

The UBIT would apply as Mark mentioned if there would be equity participation, but this doesn't seem to be the case, right?

Mark Nolan · Answer

@Steve Frick

Good questions. Are you saying that you would invest your solo 401k as an equity investment into the entity that will flip real estate? If yes, then you in combination with your 401k  generally cannot own 50% or more of the existing entity. Certain family members would also need to be included in this 50% test. Also, you cannot be an employee of the entity. Another item to consider is that UBIT may also apply at the 401k level if the entity is considered an active business.

Matt Motil · Answer

When using retirement funds, you have to keep everything at arms-length. There can be no cross-mingling of funds, etc. The 401(k) would need to handle everything with regards to that deal. You can do other projects with the business, but your personal money and retirement money need to be kept in separate projects.

Mark Limke · Answer

I don't know anything on the topic, but my thought is that you might try searching for Solo 401(k) rather than solo401. There are a ton of hits on that topic.

Best of luck investing, my friend!