The Solo k is generally exempt to this tax if used for purchase acquisition or home improvement.

She is a disqualified person, however does she come under the following statutory exemption?

There is a de minimus exemption for assets under $2,500 though so you can expense them in the year purchased rather than depreciate.  

@Mike ReynoldsThe Solo 401k is exempt from the specific type of UBIT (UDFI tax) on debt leveraged real estate investments.

https://www.irs.gov/pub/irs-pdf/p946.pdf"You place property in service when it is ready and available for a specific use, whether in a business activity, an income-producing activity, a tax-exempt activity, or a personal activity.

If this is a one-time "flip" project and your IRA doesn't become a "dealer" in real estate, you'd have a stronger argument that the profits are exempt from UBIT because they are not inventory and not property held in the ordinary course of business.

The Safe Harbor for Small Taxpayers applies only to buildings and structural components, so appliances would not qualify under that exemption.

@Tushar PrasadThe Solo 401k is exempt from UDFI on debt financed real estate.

I am not an Attorney but you might benefit by waiting as I believe you get a stepped up basis In the property by not doing so as you lose the $500k capital gains exemption (Have no idea what price range we are talking about)Internal transfer by Quit Claim does not prevent much of a problem in Texas but there would be little reason not to do a warranty deed

If your W2 income is at or near the 127k mark then the flipping profit would be exempt from the SS portion of the self employment tax (which is the majority of it) anyways correct?