![](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/129189/small_1621418242-avatar-dawn_wi.jpg?twic=v1/output=image&v=2)
14 January 2014 | 7 replies
If you use your Solo 401(k) to purchase real estate, I understand that there are certain prohibitions on it, such as all income must go back into the property.As far as hiring people to work on the property, from what I read there are disqualified persons and non-disqualified persons.A "friend" is listed as a non-disqualified person.
![](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/10128/small_1621349131-avatar-raburns.jpg?twic=v1/output=image&v=2)
21 April 2017 | 4 replies
If I bought a mobile home or other property with the IRA and collected the lease payments from a lease purchase agreement and paid the federal and state taxes would that constitute a prohibitive transaction?
![](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/341557/small_1621445396-avatar-bayboy.jpg?twic=v1/output=image&v=2)
18 June 2015 | 5 replies
I haven't heard anyone cite any law or regulation prohibiting the assigning of an REO.
![](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/153928/small_1621419832-avatar-jcase21.jpg?twic=v1/output=image&v=2)
18 May 2016 | 21 replies
That's to set up your 401k after you have a non passive income company.On the 401k side you will want to have a strong fundamental understanding of the rules and prohibited transaction or situations after you get started.
![](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/154733/small_1621419885-avatar-bmcgrath.jpg?twic=v1/output=image&v=2)
20 October 2016 | 8 replies
@Bill McGrathFollowing are the similarities and differences between the solo 401k and the self-directed IRA.The Self-Directed IRA and Solo 401k Similarities Both were created by congress for individuals to save for retirement;Both may be invested in alternative investments such as real estate, precious metals tax liens, promissory notes, private company shares, and stocks and mutual funds, to name a few;Both allow for Roth contributions;Both are subject to prohibited transaction rules;Both are subject to federal taxes at time of distribution;Both allow for checkbook control for placing alternative investments;Both may be invested in annuities;Both are protected from creditors;Both allow for nondeductible contributions; andBoth are prohibited from investing in assets listed under I.R.C. 408(m).The Self-Directed IRA and Solo 401k DifferencesIn order to open a solo 401k, self-employment, whether on a part-time or full-time basis, is required;To open a self-directed IRA, self-employment income is not required;In order to gain IRA checkbook control over the self-directed IRA funds, a limited liability company (RIA LLC) must be utilized;The solo 401k allows for checkbook control from the onset;The solo 401k allows for personal loan known as a solo 401k loan;It is prohibited to borrow from your IRA;The Solo 401k may be invested in life insurance;The self-directed IRA may not be invested in life insurance;The solo 401k allow for high contribution amounts (for 2016; 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 the solo 401k;The self-directed IRA participant/owner may not serve as trustee or custodian of her IRA; instead, a trust company or bank institution is required;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 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 (Note that 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 RMD requirement applicable to Roth 401k contributions including Roth Solo 401k contributions and earnings.)
![](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/215934/small_1621433860-avatar-scott_n.jpg?twic=v1/output=image&v=2)
30 May 2015 | 9 replies
If you take receipt of the money personally, instead of having it flow back to the IRA, that would be a prohibited transaction, and treated as a distribution from your IRA.
![](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/367/small_1621345436-avatar-nscalero.jpg?twic=v1/output=image&v=2)
19 February 2010 | 25 replies
It can also be a disaster if you were to participate in a prohibited transaction.As for speaking with a CPA, I do recommend it but it goes without saying that your CPA should be familiar with RE and qulaified plan tax implications.
![](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/428381/small_1621476192-avatar-josl.jpg?twic=v1/output=image&v=2)
13 May 2016 | 3 replies
They can participate in the same investment, so long as they do not cause prohibited transactions, including enabling transactions.
![](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/385004/small_1621448205-avatar-nathanw18.jpg?twic=v1/output=image&v=2)
16 February 2018 | 10 replies
The point is this - you personally must understand the prohibited transaction rules, and one of the basic ones is your involvement as disqualified person, and if something is unclear seek professional guidance.
![](https://bpimg.biggerpockets.com/no_overlay/uploads/social_user/user_avatar/773764/small_1621497100-avatar-chrispike.jpg?twic=v1/output=image&v=2)
13 October 2017 | 20 replies
Perhaps enough of an incentive could be provided by you to her without making the deal prohibitive for yourself.