All Forum Posts by: K Luu

@Nicholas Aiola, thanks for your continued contributions to the forums. 

I know this is a common question, but would like you to comment based on what Tom Wheelwright said on a recent podcast (see link w podcast and transcript below). 

So scenarios is: if someone has W2, makes 400k, invest 100k in a syndication few yrs ago, gets 30k K1 depreciation loss reported, and the syndication divest this year to give 40k profit, walk me through the tax deductions. (is 40k taxed at what rate, etc) Most would say 30k passive loss from syndication needs to offset passive gains elsewhere and cannot offset W2, assuming no REPS status. BUT in podcast transcript, Tom says when syndication divest, the passive loss becomes ACTIVE loss and can offset any income including W2. 

Transcript is long, have to search the discussion of the above scenario to get the context. So is Tom right or wrong? 

https://leftfieldinvestors.com...

Thank you for keeping this thread going! 

Hypothetical situation: If I have say 50k in a 401k and want to "cash out" , according to IRS, there's a 10% penalty plus pay tax on it as income since it was taxed deferred when I originally contributed into it. Suppose I do this cash out, then immediately invest the entire amount in the same year in oil and gas investments that promises 100% of invested amount is tax deductible. Does that mean that I would just pay the 10% penalty for early withdrawal and the rest of it won't be taxed as that remaining amount can be deducted from my w2 income if said amount was in oil and gas investments? 

Thank you for taking the time to share your knowledge!

I have a complex question: Can you use a solo 401k to participate in a land easement/fee simple type syndication where investors pool funds and purchase a property then later donate that property to charity/land trust and not develop the land, to get a tax deduction on W2 income? The solo401k is under a different EIN (Trust account) than the W2 income earner EIN, but the same W2 earner is the trustee of the solo 401k. Ie, trying to use available pre-tax vs limited post-tax dollar for a tax deduction. 

So another general solo 401k plan question, there's a company out there that offers a "unique" solo 401k product that offers "asset protection" by setting up a LLC layer in WY (supposedly can make your LLC anonymous? if someone is searching for your assets..). It's like 10x more expensive to setup due the "unique" asset protection layer.

Just wanted to get the experts' thoughts?

OK, I found the answer to my question above after more research, that a new EIN is generated for the new solo 401k upon setup, and that EIN is used to open the bank checking account that will hold the funds. The sponsor of the solo 401k would walk through the rollover part to be sure its not a taxable distribution but a roll over, etc. 

My next question is, is the tax advantages of real estate forced depreciation in a syndication deal (done w solo 401k funds) preserved, so the depreciation can be used to offset passive gains in the deal?

If you invest a solo 401k funds in a note fund or interest bearing hard money loan, the interest earned would be tax deferred, right? 

Can someone explain the technical structure of how a checkbook solo 401k is setup? I understand the general concept and the eligibility requirement for self-employment.

Please fill in the gaps in the prucess: so you create a trust at a custodian or trust company that holds the solo 401k, and the owner is the trustee and has full control on which investments to participate in (eg real estate syndication). Compared to a SD-IRA, do you need to create a new EIN (tax ID) or use the owner EIN? Next you open a checking account at a local bank, how is that "linked" to your trust 401k at the custodian trust? Again do you use a new EIN or your own? If you run a side consulting gig that earns steady extra income to be eligible, do you need to incorporate or use an LLC for your gig, and open the back account in the gig company or LLC (again different EIN)? Say there's an old 401k at Vanguard that is to be rolled over into this new solo 401k, the funds has to go from Vanguard to your bank, but via the custodian trust?

Thank you in advance. 

General question: What has more tax advantages, investing say 50k from a SD-IRA or 50k from post-tax income dollar in a passive syndication deal? You can make standard assumptions in the deal. Are there tax advantages that are loss of you invest from a SD-IRA since it is already a tax shelter?

@Nicholas Aiola, thanks for your continued contributions to the forums. I'm new to BP and have softball questions:

1) If I invest portions of a SD-IRA in a multifamily SYNDICATION as a limited partner, the schedule K-1 filed by the syndication should have info for a CPA to figure out UBIT and UDFI taxes owe by the SD-IRA?

2) SD-IRA has to file Form 990-T using its own EIN to file #1, and not my personal tax ID?

3) How does a trust and LLC status as it relate to me (the investor) play into the above, if any, to stream line things?

Thanks for the inputs. I have setup a meeting with a CPA next week to go over everything. I just got too excited and ahead of myself after learning that I can actually take control of an old 401k to do real estate investments, instead of being stuck in mutual funds. 

Hi BP, I'm new to the forum, and have a question about converting a traditional 401(k) into a solo 401(k) with checkbook control to be able to invest in real estate, and what constitute as self-employment to qualify for a solo 401(k)?

Quick background: I have a regular W2 job w/ it's own 401(k) plan, but recently changed job and want to convert the 401(k) from the prior employer into a solo 401(k) to invest in real estate. I've contacted one of the solo 401(k) companies and have an idea of what's involved.

My understanding is, you need to be self-employed and make at least $500 or more a year in income to qualify for a solo 401(k), correct? Some people have a side job/consultant job that would qualify in additional to their regular W2 job... 

Since I'm just getting started, my "side" job has not been fully established yet, but I wish to tap into the prior 401(k) to do real estate deals. I do misc consultation on the side (for a kids robotics competition, for example in the past 2 years) and misc jobs, down to mowing the lawn, car maintenance for neighbor/friends, fixing things around the house, selling on Ebay, etc... that I collect "income" for, but they would add up to >$500. If I also do day-trading (stocks) in a personal account on the side, can I report my profits from day-trading as "income" to pad my side "jobs", since that would net >>$500/year? I plan to expand on the consultation gig eventually once I get settled. So is my self-employment "job(s)" legitimate if I have a paper trail showing receipts, etc of how the income was earned, and thus qualify to open a solo 401(k)?

Thanks in advance.