QUESTION: I recently bought an investment property under my Solo 401k. I am thinking to pay all the repair expenses by my personal credit card. Then, I will pay the credit card bill with a check from my solo 401k. Is this way ok?
ANSWER:It is prohibited to pay solo 401k investment expenses using your personal credit card and then having the solo 401k pay the credit card company.
Instead, solo 401k funds must be used to pay for the investment expenses; therefore, the funds must flow directly from the solo 401k bank account.
Paying Solo 401k Expenses
Solo 401k Land Expenses
I have a question regarding the 401k business financing plan.
- I roll my IRA into my new C Corp's 401k plan. NOTE: If your IRA is a Roth IRA you are not eligible to roll it over.
- The 401k plan uses the funds to purchase my new C Corp's stock.
- After some period of time, the company becomes profitable.
Q: Can the C Corp buyback its stock from the 401k plan?
ANSWER: Yes provided that it buys the stock back at fair market value as of the time of the buyback.
Q: If so, will it be possible for me to exit the 401k plan at some point and roll the funds back into a rollover IRA without leaving the C Corp's employment?
ANSWER: Technically yes. However, the best practice is for the corporation to continue to maintain the 401k plan after the buyback and as long as the corporation continues to be in business. Winding down the 401k after the buyback could be challenged as a violation of the permanency requirement.
L. Boutwell in Irvine California
401k Business Financing FAQs
Mark Nolan has been active in the 401k and IRA industry for over 18 years. Working as a 401k administrator at Nationwide Insurance Company; then working as a Compliance Officer and Manager at self-directed IRA/401k custodian companies such as Trust Administration Services Corporation (now owned by Equity Trust Company), to IRA Services Trust company. Mark is currently the Compliance Manager at MySolo401k.Net.