Partner with Self-Directed Solo 401k in Real Estate Purchase

So if I purchase an investment single family residence with $100k of my and say $50k in personal funds...

QUESTION 1. Can I do this? 2/3 and 1/3 ownership.

Answer: Yes the ownership is based on the amount of funds put up by each investor. to read more information on how to title this type of investment known as tenants-in-common.

QUESTION 2. When I file taxes would I personally just file for the $50k/% of my ownership?

Answer: When the solo 401k owner invests alongside his or her self-directed solo 401k, he or she only pays capital gains on his or her personal investment portion. The other portion owned by the 401k is sheltered from taxes until solo 401k distributions commence. 

QUESTION 3. The property will be rented out and the proceeds and losses would be administered based on the % of ownership. How does depreciation work with a real estate solo 401k investment?

Answer: Depreciation does not apply when a solo 401(k) owns real estate; therefore, the portion owned by the solo 401(k) is not depreciated.

QUESTION 4.  I will not in any way personally use the property, but when I am ready to remove it from my Solo 401K, how do I do that, and by the way I am almost 60 years old now (in August).

Answer: When making solo 401k distributions, they can be made in the form of cash or processed as an in-kind distribution in the case of assets such as real estate.  Therefore, under this particular scenario the percentage of the property owned by the solo 401(k) is assigned to the solo 401k owner and he or pays taxes on the value of the property. This would result in the solo 401k owner now owning the property outright.

QUESTION 5. Doing this, I am not taking a loan from my Solo 401K, how much of my Solo401k trust can I use?

Answer: The IRS dose not restrict the amount of retirement funds including solo 401k funds that may be invested in real estate; therefore, if the solo 401k owners chooses, he or she can invest all of the solo 401k funds in real estate.

QUESTION 5. Let's say in 2 or 3 years, I wish to sell or transfer the ownership to me personally, how do I do that? Can I over a course of a number of years remove say 20% of the Solo 401k investment and claim that on my personal tax as a distribution?

Answer: Yes the solo 401k distribution rules permit partial in-kind distributions of property  each year. Among other items, the property deed would need to be recorded each time to update the new ownership percentages.

Visit Solo 401k FAQs for more information regarding the solo 401k rules.