I have an investment that I would like to make into an LLC. This LLC will be building houses and will be taking on leverage from a loan.
The LLC will be owned by Myself and a Partner.
The total investment is $250k into the LLC, I would like to use $150k from my personal account (Equity) and $100k from my Roth 401k (Equity or Loan).
I would like to avoid paying UBTI if possible. As the Roth will be investing in a leveraged product, UBTI will be generated.
Is it possible to structure the Roth Investment as a loan to the LLC with say a 100-150% annual interest payment? As it's a loan, I would assume I can avoid the UBTI this way but unsure if this is an option as I am also personally investing via equity.
ANSWER:
The solo 401k rules do not allow for loans (i.e., promissory note investment) from your solo 401k to an LLC where you are also personally an investor.
Also, it is prohibited for the solo 401k owner to own 50% or more of an existing LLC and the aggregation rules apply (i.e., both your solo 401k funds and your personal funds count toward the 50% test).