Solo Roth 401k / Unique Situation

[Jon Schoeller]

I will try to be as brief as possible about my situation but I do believe it is rather unique. 

What I want to do: I want to set up a Solo Roch 401k this year and have checkbook power of the account for investing in real estate flips. All profit going back to the Solo account of course and being tax-free when I want it all after 59 1/2. 

My situation: I am basically a sub-contracted consultant/CEO for a real estate investment firm. The business is manager operated, me being that manager. But I am not on any paperwork as an owner or employee. I am paid as a 1099 contractor through my consulting business. I don't have any employees of my own which makes me Solo eligible. 

The investment firm takes investor's money and flips houses. I often invest in these flips with my personal money as well. 

The question: Am I still eligible to give the investment firm my Solo Roth money or am I too close? 

Any advice would be great. Thank you. 

[Brian Eastman]

@Jon Schoeller

Not only is your situation unique.  It is potentially quite messy.  I suggest you speak with both your Solo 401(k) provider and your licensed tax counsel.

Anything directly or indirectly involving the company you control would be self-dealing for the Solo 401(k) and should be avoided.  As the manager, you have day-to-day control, which makes that company a disqualified party.

Your perception that flipping is entirely tax free inside of a retirement plan is misguided.  When a tax-exempt entity engages in a trade or business on a regular or repeated basis, it is subjected to tax on Unrelated Business Taxable Income.  Flipping is such a business activity.   Passive income investments such as hard money lending or holding rental properties are better suited to a tax-sheltered retirement plan.