All Forum Posts by: Chris Weiler

I would recommend transfering the property into a land trust with the beneficial interest going to them personally now, but changed into a newly created single-member LLC after the 1031 exchange. If you have or plan to have multiple rentals, I would recommend each property use the same structure above. Then create an S-corp to "manage" the properties. All interaction with tenants (including paying rents) and paying of contractors would be taken care of by the S-corp. In essence, the S-corp owns nothing but manages everything. If you're sued, you can "fire" the s-corp and create a new one to manage your properties. Having the S-corp also helps with "real estate professional" status and could potentially give you limited active income for specific write-offs and an ability to contribute to a retirement account.

Ok, right off the bat, I know Solo 401K’s cannot directly borrow using a recourse loan. But hear me out and let’s discuss a specific scenario: 

An LLC is created with 3 equal partners. One partner is a Solo-K and the other two partners are not "disqualified persons". The goal is to buy cash flowing rentals. Let's assume the LLC gets a recourse loan (for a rental property) and only the two partners (not the trustee of the 401K) signs a "personal guaranty". Let's also assume the lender is OK with the trustee (me) of the Solo-K not signing a personal guaranty. In this scenario, the 401K benefits from a recourse loan and the lender has no recourse against the trustee. Any idea if this would fly? Do you think this is a prohibited transaction?

Sorry, it does not. 

Hey  Dmitriy, thanks for setting up this post! There is a lot of disinformation out there about self-directed Solo-K's and having a real pro overlook a post is helpful. I have a question about UBIT. Since the new tax plan reduces the corporate rate from 35% to 21% does this also mean a decreased UBIT rate down to 21%?

The 25K loan scenario described is definitely a quid pro quo prohibited transaction. Yes, the likelihood of getting caught is very low. But why risk it? Also, the whole idea is moot. There are at least two ways to take money out of a Roth IRA or Roth 401K without penalty or risk of audit. You can't take out gains without penalty, but you can take out any contributions you have made to Roth accounts. Since this was "already taxed" money you can take it out of the account and use it for whatever you want. So, if you want to take 25K to "sink into a custom 82 Jeep Scrambler diesel conversion", as long as you have 25K or more in contributions, you can take it out without worry of audit or penalty or need to pay back the withdrawal. The other option, if one is willing to pay back the withdrawal,(and assuming it's a Roth 401K, which I prefer) is to do a participant loan. In the 25K scenario as long as the participant had at least 50K in the account they can make the loan to themselves and pay it back over time. There are just too many ways to do things legitimately. Don't risk your hard-earned savings on bad ideas.

Hey All, as an update, John Park sent me my my restated docs in mid-December. 

OK, looks like my last message didn't post correctly.

@Dick Rosen , what ever happened with your claim?

@Dick Rosen, what ever happened with your claim?

@Dmitriy Fomichenko , I appreciate your concern. John Park did contact me regarding re-statement of my current plan to make it compliant with the new guidelines. I was under the impression that executing these documents would be included as part of the one time fee I paid. It was not. I have to pay each time there is a need to do a re-statement. This time the fee is $125. I'm disappointed that I was not told about future re-statement fees when my plan was originally created. In any case, I paid the $125 in May and have yet to see the re-statement. After I sent John a couple of reminder emails, I'm told the re-statement will happen this month. That was in the beginning of the month and I have yet to see the new documents. I'll re-post with updates once I have them.