We live in New York and are looking at a vacation condo Located in Los Angeles California. Is there a problem if we purchase the condo from the Solo 401K in a few years (I know we can take distributions) when we have sold our current home if we use the then current appraised value?
Good question. Unfortunately the purchase of the LA, CA real estate owned by your Solo 401k by you would be a blatant prohibited transaction. Specifically, the following: "Sale, exchange, or leasing of property between a plan and a disqualified person." Put differently, The rules prohibit your Solo 401k from holding property in which you or disqualified persons currently occupy or plan to occupy. In other words, the property must be for investment purposes only. Such transaction would be deemed prohibited transaction, with the negative consequences to your Solo 401k resulting in taxes and penalties on the entire balance of the Solo 401k not just the real estate that you would have purchased from it.