Do we need him to roll over into an IRA first?

The original loss (and associated legal fees) are reported on line 8a of Schedule D and then roll over year over year on line 14 of the same schedule.Good luck!

A 401k can accept rollovers inbound from a traditional IRA.

You can rollover your funds to a Solo 401k, which has a loan provision, but the loan is limited to $50K or 50% of the balance, whichever is less. 

If you current employer plan allows for in-service rollovers, depending on age, this can also be accomplished. 

I have been moving my houses as they roll over into that.We have several deals that all in we are in 20k and netting 500 a door.

If a Roth IRA distribution is qualified, all distributed assets are tax-free.Nonqualified If a distribution is nonqualified, some of the assets (generally the earnings) may be subject to regular income tax and a 10 percent early distribution penalty tax.Order of DistributionsTax laws require Roth IRA assets to be distributed in the following order: regular contributions, conversions and retirement plan rollovers, and earnings (IRC Sec. 408A(d)(4) and Treas.

If you borrow from your own IRA, it will be deemed a taxable distribution;Unlike an IRA, a Solo 401k can invest in life insurance;The solo 401k allow for high contribution amounts (for 2015; the solo 401k contribution limit is $53,000, whereas the self-directed IRA contribution limit is $5,500);The solo 401k business owner can serve as trustee of his or her solo 401k;The self-directed IRA participant/owner may not serve as trustee or custodian of his or her IRA; instead, a trust company or bank institution is required;Unlike an IRA, generally when distributions commence from the solo 401k a mandatory 20% of federal taxes must be withheld from each distribution and submitted electronically to the IRS by the 15th of the month following the date of each distribution;Rollovers and/or transfers from IRAs or qualified plans (e.g., former employer 401k) to a solo 401k are not reported on Form 5498, but rather on Form 5500-EZ, but only if the air market value of the solo 401k exceeds $250K as of the end of the plan year (generally 12/31);When funds are rolled over or transferred from an IRA or 401k to a self-directed IRA, the amount deposited into the self-directed IRA is reported on Form 5498 by the receiving self-directed IRA custodian, generally by May of the year following the rollover/transfer.Rollovers (provided the 60 day rollover window is satisfied) from an IRA to a Solo 401k or self-directed IRA are reported on lines 15a and 15b of Form 1040;Pre-tax IRA contributions on reported on line 32 of Form 1040;Pre-tax solo 401k contributions are reported on line 28 of Form 1040;Roth solo 401k funds are subject to RMDs;A Roth 401k may be transferred to a Roth IRA--from a planning perspective, it may be advantageous to transfer Roth Solo 401k funds to a Roth IRA before turning age 70 ½ in order to escape the Roth 401k RMD requirement;Roth IRA funds are not subject to requirement minimum distributions (RMDs);The fair market value (FMV) of assets held in a self-directed IRA is reported on form 5498;The fair market value of assets held in a solo 401k are reported on Form 5500-EZ;At termination, the solo 401k is required to file a final Form 5500-EZ and 1099-R; andAt termination, the self-directed IRA is only required to file a form 1099-R.

I do not believe there is any concept of "depreciation roll over" as part of 1031 Exchange.

I will even do a month to month stipulating it will roll over to a long term relationship.