buying assets with Solo 401k

[cswain11]

Hi Everyone,

I recently set up a Solo 401k and am starting to buy assets with it. I have a basic question: when I buy the assets do I specify the name of my Solo 401K as the asset holder - e.g. The [My Name] 401k Plan?

If I specified myself as the asset holder then I would be executing a "prohibited transaction". Right?

Thank you!

 

[bingybear]

I believe a solo 401k is much like a normal IRA that is setup to buy alternative investments. If you were to buy real estate with it the title would be in the name of the 401k. You could not derive benefit from the real estate. That is you could not live in it or use it as an office. You also could not pay repairs or taxes on the real estate with money from outside the 401k. Doing this type of stuff would likely invalidate the 401k and force it to be declared to have been distributed.

So yes you would not title the asset in your name. But that is a very minor part of prohibited transactions. Don't buy a car with the 401k so you have something to drive. And makes sure you don't intermingle 401k and other $. Like buying real estate.. the 401k would have to pay the insurance, any mortgage, taxes... etc. That means you could not write off the real estate taxes on yours as you are not the owner/payer.

 

[Sunset]

I fail to see the advantage of buying assets in a solo 401K compared to simply buying funds/stocks and then buying assets in a regular account (name) so that depreciation, expenses, etc can be deducted.

Unless of course you mean to buy actual gold or paintings with the solo 401K to avoid the collectible tax on appreciation ??