Nov 21

How To Use Your Self-Directed Solo 401k to Invest in Tax Liens

It’s a little-known fact that tax liens can be purchased with retirement account funds. By Self-Directing your Solo 401(k) Plan investments into tax liens, your profits are tax-deferred back into your retirement account. More importantly, if you have full checkbook control over your Solo 401(k), the purchases can be made on the spot as fast as you can write a check. Tax Liens have been a lesser known and underappreciated money-maker, however learning how they can magnify your earnings in a tax-deferred 401(k) will make them one of the soundest investments in your retirement account.

The purchase of tax lien certificates is a surprisingly safe investment. The transaction is fast and its characteristics make tax liens a perfect investment for the individual with full checkbook control of an IRA Financial Group Solo 401(k) Plan.

How To Use Your Self-Directed Solo 401k to Invest in Tax LiensThe Solo 401(k) Plan offers a highly attractive loan feature allowing for the purchase of tax liens. Under the Solo 401(k) Plan, a participant can borrow up to either $50,000 or 50% of their account value – whichever is less. The IRA Financial Group Solo 401(k) Plan documents will allow you to use a loan from your Solo 401(k) to finance your tax lien purchase.

These unique IRS approved structures are created by IRA Financial Group’s in-house tax and ERISA professionals who personally customize your account structure to suit your needs. Only a handful of institutions are skilled in these specialized account structures and IRA Financial Group is the “gold standard” for Compliance, Leadership, Customer Service, and Technological Innovation.

Facts & Opportunities Surrounding Tax Liens

Real estate has long been considered one of the best (and safest) investment opportunities for both the large and small capitalist. Savvy investors know that the trick to making money in a downward spiraling market is to purchase properties for a fraction of their value. The question is…How? Many are finding the perfect answer in the high-profit possibilities of investing in Tax Lien Sales.

When a property owner falls behind on their taxes, failing to pay for one or more years, the local taxing authority has the legal right to place a lien or repossess the property and sell it at auction to recoup the lost tax revenue. How long local authorities wait to seize individual properties, and how much they allow to be owed on it before one of these events is up to the lien laws in their particular area. In many cases properties may be acquired for a few thousand dollars, regardless of how much it’s actually worth! Similarly, paying off the lien on others may cost more than the house or land is worth. A savvy investor takes the time to research each property carefully prior to sale day.

Tax Lien Sales

Tax lien sales usually happen at public auctions once or twice a year, depending on the area in which it is located, and how many properties the government may seize annually for back taxes. Larger urban areas may hold monthly auctions, while smaller rural ones might only have one a year.

Types of Tax Liens

There are two types of tax lien sales through auction: the tax lien certificate; and the tax lien deed. Both can be a safe yet profitable opportunity for investors with check book control.

Tax Lien Certificate sales offer the delinquent homeowner one last chance to retain ownership of their property, by using third-party investment money to pay off the taxes and give them a bit more time to collect the money needed to pay their debt without the risk of losing their home. When an investor bids on a tax lien certificate, he is in essence agreeing to loan the homeowner the money needed to pay all taxes due. The homeowner, in turn, agrees to pay back the tax lien certificate holder – with interest – by a specified date. If the homeowner fails to pay the debt on time, the deed to the property is transferred to the investor for the amount paid on the taxes. Either way the investor makes a profit: either on the interest he earns on the loan; or by obtaining the property for a fraction of its value through the tax lien sale, and then reselling it.

Tax Lien Deed sales are handled a bit differently, since the investor is actually bidding (or buying), the complete property at the time of auction, with no responsibility to give the homeowner more time to pay his/her tax debt. Once the selling price is approved, the deed is automatically transferred to its new owner, giving the investor full reign as to what to do with the property next: renovate it; sell it as-is; or raze the existing house and build anew.

Investors usually pay more for properties in this type of tax lien sale, which may lower their profit margins compared to the acquisition of tax lien certificate properties. But, many investors prefer outright purchases to eliminate problems with current homeowners. Either way, investing in tax liens is a profitable and easy way to enter the real estate market in virtually any area.

How Much Money Can I Make and How?

1. Double Your Money Quickly. A Solo 401(k) plan can be supercharged when you buy tax lien certificates. Example: A tax lien certificate can earn up to 16% annually in your Solo 401(k). When you buy tax lien investments you generally receive the amount invested plus interest within 12 months. If you continue to reinvest in tax liens year after year at 16%, you can double your money in about 4.4 years.

2. Your Money Grows Tax-Free. By buying tax liens in an IRA Financial Group Solo 401(k), you can avoid all taxes until the money invested is withdrawn from the 401(k), which is usually around age 59 1/2. The money can be invested once, twice or a thousand times and continue to grow tax-free, so long as it is not withdrawn for personal use. If you use a Self-Directed Roth Solo 401(k), your investment will grow tax-free and you can withdraw the funds tax-free once you reach the age of 59 1/2.

3. The Flexibility to Buy Time Sensitive Investments. IRA Financial Group’s Solo 401(k) Plan allows the participant to serve in the trustee role. This means that all assets of the 401(k) trust are under your sole authority (“checkbook control”). This gives you incredible freedom to fund the investment at a moment’s notice. In this arrangement, you can buy tax liens with the stroke of the pen, without a custodian or other bureaucrat saying no or otherwise trying to slow down the process.

Tax liens are backed and leveraged by real estate and guaranteed by the governmental taxing authority. In most states, they are a first lien on real estate, and when foreclosed, they wipe out all junior liens, including mortgages. This allows you to potentially receive a valuable piece of real estate for pennies on the dollar!

Time to Act

Real property has been the cornerstone of wealth for thousands of years. While ill-informed speculators have fled real estate because of the housing bust, intelligent real estate investors are enjoying immense profits by expanding their geographic scope and investing for predictable income.

Why are we significantly less than everyone else and “The best in the business”?

Establish a Solo 401(k) with IRA Financial Group and have immediate “checkbook control” to make tax lien investments.

Our in-house tax and ERISA professionals will take care of setting up your Solo 401(k) Plan. Our tax and ERISA professionals are onsite greatly reducing the setup time and cost. You will find that our fee for this service is significantly less than other companies that perform the same or similar services.

Please contact one of our 401(k) Experts at 800-472-0646 for more information.

IRA Financial Group Facebook pageIRA Financial Group Twitter pageamazon-logoIRA Financial Group Tumblr pageIRA Financial Group Pinterest page

Jan 15

Types of Investments You Can Make With Your Solo 401k Plan

A Solo 401(k) Plan offers one the ability to use his or her retirement funds to make almost any type of investment on their own without requiring the consent of any custodian or person. The IRS and Department of Labor only describe the types of investments that are prohibited, which are very few.

The following are some examples of types of investments that can be made with your Solo 401(k) Plan:

For additional information on the advantages of using a Solo 401K Plan to make investments, please contact one of our 401(k) Experts at 800-472-0646.

IRA Financial Group Facebook pageIRA Financial Group Twitter pageamazon-logoIRA Financial Group Tumblr pageIRA Financial Group Pinterest page

Dec 03

Investing in Foreign and Domestic Real Estate with a 401k

It’s a little-known fact that Real Estate can be purchased with retirement account funds. When using a Solo 401(k) for investments in real estate, your profits are tax-deferred back into your retirement account. More important, if you have full checkbook control over your Solo 401(k), the purchases can be made on the spot as fast as you can write a check.

The purchase of Real Estate in today’s marketplace is a surprisingly advantageous investment for a Solo 401(k), since the best deals are typically foreclosures, short sales and estate sales. These characteristics make a perfect investment climate for the individual with full checkbook control of an IRA Financial Group Solo 401(k).

The Solo 401(k) Plan offers a highly attractive loan feature allowing for the purchase of real estate. Under the Solo 401(k) Plan, a participant can borrow up to either $50,000 or 50% of their account value – whichever is less. The IRA Financial Group Solo 401(k) Plan documents will allow you to use a loan from your Solo 401(k) for any real estate investment purposes.

Our unique, IRS approved structures, created by IRA Financial Group’s in-house retirement tax professionals are personally customized to suit your individual needs. Only a handful of institutions are skilled in these specialized account structures and IRA Financial Group is the “gold standard” for compliance, leadership, customer service, and technological innovation.

Steady Income Generator with no tax bite

Income from a rental property bought with a Solo 401(k) flows back into the retirement account tax-free.

On a percentage basis, the income from real estate and other alternative investments can be two to eight times higher than today’s fixed-income offerings even after paying expenses such as property taxes and insurance. Meanwhile, the account holder can eventually reap the potential appreciation of the underlying asset, tax-free.

Proceeds from selling an investment property roll back into the Solo 401(k) tax-free.

The Flexibility to Buy Time-Sensitive Investments

IRA Financial Group’s Solo 401(k) Plan offers the participant the ability to serve in the trustee role. This means that all assets of the 401(k) trust are under your sole authority. This gives you, the investor, an incredible freedom to fund the investment at a moment’s notice. In this arrangement, you can buy Real Estate with the stroke of the pen, without a fund manager or other bureaucrat saying no or otherwise trying to slow down the process.

Make any Domestic or Foreign Real Estate Investment

A Solo 401(k) Plan allows you to make either domestic or foreign real estate investments. Whether it is residential or commercial real estate property, using a Solo 401(k) plan to invest in domestic or foreign real estate offers tax advantages, such as tax deferral and/or tax free repatriation of income.

Know of a great real estate investment in or outside of the United States? Dream of retiring in your country of birth or spending part of the year overseas? A Solo 401(k) Plan allows you to buy a vacation or retirement home now at today’s prices anywhere in the world, rent it out, and then use it tax-free at the age of 59 1/2.

The IRA Financial Group has experience working with clients who have purchased real estate all over the world including, Canada, Brazil, Argentina, Costa Rica, Puerto Rico, Dominican Republic, Nicaragua, Mexico, India, Israel, Italy, France, Switzerland, Germany, Cayman Islands, Bahamas, and many more countries. Our retirement tax professionals have significant experience in structuring foreign real estate investments that are tax efficient from a U.S. and foreign tax perspective. Contact us at 800-IRA-0646 to learn more.

The IRA Financial Group Solo 401(k) enables you to:

  • Invest in real estate tax-free – all real estate related income or gains goes back into your Solo 401(k) tax-free.
  • Buy and sell domestic, foreign, commercial, residential, and rental properties as real estate 401(k) investments.
  • Invest in foreclosed properties and tax liens on the spot, or make personal loans by simply writing a check.
  • Buy and sell mortgages, notes, tax liens, tax deeds, etc.

Please contact one of our 401(k) Experts at 800-472-0646 for more information.

IRA Financial Group Facebook pageIRA Financial Group Twitter pageamazon-logoIRA Financial Group Tumblr pageIRA Financial Group Pinterest page

May 20

Purchasing Tax Liens With a Solo 401(k)

It’s a little-known fact that tax liens can be purchased with retirement account funds. By Self-Directing your Solo 401(k) Plan investments into tax liens, your profits are tax-deferred back into your retirement account. More importantly, if you have full checkbook control over your Solo 401(k), the purchases can be made on the spot as fast as you can write a check. Tax Liens have been a lesser known and under-appreciated money-maker, however learning how they can magnify your earnings in a tax-deferred 401(k) will make them one of the soundest investments in your retirement account.

The purchase of tax lien certificates is a surprisingly safe investment. The transaction is fast and its characteristics make tax liens a perfect investment for the individual with full checkbook control of an IRA Financial Group Solo 401(k) Plan.

Buying Tax Liens With Your IRA Financial Group Solo 401(k) PlanThe Solo 401(k) Plan offers a highly attractive loan feature allowing for the purchase of tax liens. Under the Solo 401(k) Plan, a participant can borrow up to either $50,000 or 50% of their account value – whichever is less. The IRA Financial Group Solo 401(k) Plan documents will allow you to use a loan from your Solo 401(k) to finance your tax lien purchase.

These unique IRS approved structures are created by IRA Financial Group’s in-house tax and ERISA professionals who personally customize your account structure to suit your needs. Only a handful of institutions are skilled in these specialized account structures and IRA Financial Group is the “gold standard” for Compliance, Leadership, Customer Service, and Technological Innovation.

Facts & Opportunities Surrounding Tax Liens

Real estate has long been considered one of the best (and safest) investment opportunities for both the large and small capitalist. Savvy investors know that the trick to making money in a downward spiraling market is to purchase properties for a fraction of their value. The question is…How? Many are finding the perfect answer in the high-profit possibilities of investing in Tax Lien Sales.

When a property owner falls behind on their taxes, failing to pay for one or more years, the local taxing authority has the legal right to place a lien or repossess the property and sell it at auction to recoup the lost tax revenue. How long local authorities wait to seize individual properties, and how much they allow to be owed on it before one of these events is up to the lien laws in their particular area. In many cases properties may be acquired for a few thousand dollars, regardless of how much it’s actually worth! Similarly, paying off the lien on others may cost more than the house or land is worth. A savvy investor takes the time to research each property carefully prior to sale day.

Tax Lien Sales

Tax lien sales usually happen at public auctions once or twice a year, depending on the area in which it is located, and how many properties the government may seize annually for back taxes. Larger urban areas may hold monthly auctions, while smaller rural ones might only have one a year.

Types of Tax Liens

There are two types of tax lien sales through auction: the tax lien certificate; and the tax lien deed. Both can be a safe yet profitable opportunity for investors with check book control.

Tax Lien Certificate sales offer the delinquent homeowner one last chance to retain ownership of their property, by using third-party investment money to pay off the taxes and give them a bit more time to collect the money needed to pay their debt without the risk of losing their home. When an investor bids on a tax lien certificate, he is in essence agreeing to loan the homeowner the money needed to pay all taxes due. The homeowner, in turn, agrees to pay back the tax lien certificate holder – with interest – by a specified date. If the homeowner fails to pay the debt on time, the deed to the property is transferred to the investor for the amount paid on the taxes. Either way the investor makes a profit: either on the interest he earns on the loan; or by obtaining the property for a fraction of its value through the tax lien sale, and then reselling it.

Tax Lien Deed sales are handled a bit differently, since the investor is actually bidding (or buying), the complete property at the time of auction, with no responsibility to give the homeowner more time to pay his/her tax debt. Once the selling price is approved, the deed is automatically transferred to its new owner, giving the investor full reign as to what to do with the property next: renovate it; sell it as-is; or raze the existing house and build anew.

Investors usually pay more for properties in this type of tax lien sale, which may lower their profit margins compared to the acquisition of tax lien certificate properties. But, many investors prefer outright purchases to eliminate problems with current homeowners. Either way, investing in tax liens is a profitable and easy way to enter the real estate market in virtually any area.

How Much Money Can I Make and How?

1. Double Your Money Quickly. A Solo 401(k) plan can be supercharged when you buy tax lien certificates. Example: A tax lien certificate can earn up to 16% annually in your Solo 401(k). When you buy tax lien investments you generally receive the amount invested plus interest within 12 months. If you continue to reinvest in tax liens year after year at 16%, you can double your money in about 4.4 years.

2. Your Money Grows Tax-Free. By buying tax liens in an IRA Financial Group Solo 401(k), you can avoid all taxes until the money invested is withdrawn from 401(k), which is usually around age 59 1/2. The money can be invested once, twice or a thousand times and continue to grow tax-free, so long as it is not withdrawn for personal use. If you use a Roth Solo 401(k), your investment will grow tax-free and you can withdraw the funds tax-free once you reach the age of 59 1/2.

3. The Flexibility to Buy Time Sensitive Investments. IRA Financial Group’s Solo 401(k) Plan allows the participant to serve in the trustee role. This means that all assets of the 401(k) trust are under your sole authority (“checkbook control”). This gives you incredible freedom to fund the investment at a moment’s notice. In this arrangement, you can buy tax liens with the stroke of the pen, without a custodian or other bureaucrat saying no or otherwise trying to slow down the process.

Tax liens are backed and leveraged by real estate and guaranteed by the governmental taxing authority. In most states, they are a first lien on real estate, and when foreclosed, they wipe out all junior liens, including mortgages. This allows you to potentially receive a valuable piece of real estate for pennies on the dollar!

Time to Act

Real property has been the cornerstone of wealth for thousands of years. While ill-informed speculators have fled real estate because of the housing bust, intelligent real estate investors are enjoying immense profits by expanding their geographic scope and investing for predictable income.

Why are we significantly less than everyone else and “The best in the business”?

Establish a Solo 401(k) with IRA Financial Group and have immediate “checkbook control” to make tax lien investments.  Our in-house tax and ERISA professionals will take care of setting up your Solo 401(k) Plan. Our tax and ERISA professionals are onsite greatly reducing the setup time and cost. You will find that our fee for this service is significantly less than other companies that perform the same or similar services.

Please contact one of our Solo 401(k) Experts at 800-472-0646 for more information.

IRA Financial Group Facebook PageBergman 401K Report Twitter

Mar 20

Purchasing Tax Liens With Your 401(k)

It’s a little-known fact that tax liens can be purchased with retirement account funds. By Self-Directing your Solo 401(k) Plan investments into tax liens, your profits are tax-deferred back into your retirement account. More importantly, if you have full checkbook control over your Solo 401(k), the purchases can be made on the spot as fast as you can write a check. Tax Liens have been a lesser known and under-appreciated money-maker, however learning how they can magnify your earnings in a tax-deferred or 401(k) will make them one of the soundest investments in your retirement account.

The purchase of tax lien certificates is a surprisingly safe investment. The transaction is fast and its characteristics make tax liens a perfect investment for the individual with full checkbook control of an IRA Financial Group Solo 401(k) Plan.

Using a Solo 401(k) to Purchase Tax LiensThe Solo 401(k) Plan offers a highly attractive loan feature allowing for the purchase of tax liens. Under the Solo 401(k) Plan, a participant can borrow up to either $50,000 or 50% of their account value – whichever is less. The IRA Financial Group Solo 401(k) Plan documents will allow you to use a loan from your Solo 401(k) to finance your tax lien purchase.

These unique IRS approved structures are created by IRA Financial Group’s in-house tax and ERISA professionals who personally customize your account structure to suit your needs. Only a handful of institutions are skilled in these specialized account structures and IRA Financial Group is the “gold standard” for Compliance, Leadership, Customer Service, and Technological Innovation.

Facts & Opportunities Surrounding Tax Liens

Real estate has long been considered one of the best (and safest) investment opportunities for both the large and small capitalist. Savvy investors know that the trick to making money in a downward spiraling market is to purchase properties for a fraction of their value. The question is…How? Many are finding the perfect answer in the high-profit possibilities of investing in Tax Lien Sales.

When a property owner falls behind on their taxes, failing to pay for one or more years, the local taxing authority has the legal right to place a lien or repossess the property and sell it at auction to recoup the lost tax revenue. How long local authorities wait to seize individual properties, and how much they allow to be owed on it before one of these events is up to the lien laws in their particular area. In many cases properties may be acquired for a few thousand dollars, regardless of how much it’s actually worth! Similarly, paying off the lien on others may cost more than the house or land is worth. A savvy investor takes the time to research each property carefully prior to sale day.

Tax Lien Sales

Tax lien sales usually happen at public auctions once or twice a year, depending on the area in which it is located, and how many properties the government may seize annually for back taxes. Larger urban areas may hold monthly auctions, while smaller rural ones might only have one a year.

Types of Tax Liens

There are two types of tax lien sales through auction: the tax lien certificate; and the tax lien deed. Both can be a safe yet profitable opportunity for investors with checkbook control.

Tax Lien Certificate sales offer the delinquent homeowner one last chance to retain ownership of their property, by using third-party investment money to pay off the taxes and give them a bit more time to collect the money needed to pay their debt without the risk of losing their home. When an investor bids on a tax lien certificate, he is in essence agreeing to loan the homeowner the money needed to pay all taxes due. The homeowner, in turn, agrees to pay back the tax lien certificate holder – with interest – by a specified date. If the homeowner fails to pay the debt on time, the deed to the property is transferred to the investor for the amount paid on the taxes. Either way the investor makes a profit: either on the interest he earns on the loan; or by obtaining the property for a fraction of its value through the tax lien sale, and then reselling it.

Tax Lien Deed sales are handled a bit differently, since the investor is actually bidding (or buying), the complete property at the time of auction, with no responsibility to give the homeowner more time to pay his/her tax debt. Once the selling price is approved, the deed is automatically transferred to its new owner, giving the investor full reign as to what to do with the property next: renovate it; sell it as-is; or raze the existing house and build anew.

Investors usually pay more for properties in this type of tax lien sale, which may lower their profit margins compared to the acquisition of tax lien certificate properties. But, many investors prefer outright purchases to eliminate problems with current homeowners. Either way, investing in tax liens is a profitable and easy way to enter the real estate market in virtually any area.

How Much Money Can I Make and How?

1. Double Your Money Quickly. A Solo 401(k) plan can be supercharged when you buy tax lien certificates. Example: A tax lien certificate can earn up to 16% annually in your Solo 401(k). When you buy tax lien investments you generally receive the amount invested plus interest within 12 months. If you continue to reinvest in tax liens year after year at 16%, you can double your money in about 4.4 years.

2. Your Money Grows Tax-Free. By buying tax liens in an IRA Financial Group Solo 401(k), you can avoid all taxes until the money invested is withdrawn from the 401(k), which is usually around age 59 1/2. The money can be invested once, twice or a thousand times and continue to grow tax-free, so long as it is not withdrawn for personal use.

3. The Flexibility to Buy Time Sensitive Investments. IRA Financial Group’s Solo 401(k) Plan allows the participant to serve in the trustee role. This means that all assets of the 401(k) trust are under your sole authority (“checkbook control”). This gives you incredible freedom to fund the investment at a moment’s notice. In this arrangement, you can buy tax liens with the stroke of the pen, without a custodian or other bureaucrat saying no or otherwise trying to slow down the process.

Tax liens are backed and leveraged by real estate and guaranteed by the governmental taxing authority. In most states, they are a first lien on real estate, and when foreclosed, they wipe out all junior liens, including mortgages. This allows you to potentially receive a valuable piece of real estate for pennies on the dollar!

Time to Act

Real property has been the cornerstone of wealth for thousands of years. While ill-informed speculators have fled real estate because of the housing bust, intelligent real estate investors are enjoying immense profits by expanding their geographic scope and investing for predictable income.

Why are we significantly less than everyone else and “The best in the business”?

Establish a  Solo 401(k) with IRA Financial Group and have immediate “checkbook control” to make tax lien investments.

Our in-house tax and ERISA professionals will take care of setting up your Solo 401(k) Plan. Our tax and ERISA professionals are onsite greatly reducing the setup time and cost. You will find that our fee for this service is significantly less than other companies that perform the same or similar services.

Please contact a tax expert at 800-472-0646 for more information.

Feb 05

Investments You Can Make with a Solo 401k

A Solo 401(k) Plan offers one the ability to use his or her retirement funds to make almost any type of investment on their own without requiring the consent of any custodian or person. The IRS and Department of Labor only describe the types of investments that are prohibited, which are very few.

The following are some examples of types of investments that can be made with your Solo 401(k) Plan:

  • Residential or commercial real estate
  • Domestic of foreign real estate
  • Raw land
  • Foreclosure property
  • Mortgages
  • Mortgage pools
  • Deeds
  • Private loans
  • Tax liens
  • Private businesses
  • Limited Liability Companies
  • Limited Liability Partnerships
  • Private placements
  • Precious metals and certain coins
  • Stocks, bonds, mutual funds
  • Foreign currencies

 

Solo 401k

 

Real Estate

The IRS permits using a Solo 401(k) to purchase real estate or raw land. Since you are the trustee of the 401(k) Plan, making a real estate investment is as simple as writing a check from your 401(k) Plan bank account. The advantage of purchasing real estate with your Solo 401(k) Plan is that all gains are tax-deferred until a distribution is taken (pre-tax 401(k) distributions are not required until the Plan Participant turns 70 1/2). In the case of a Roth Solo 401(k) Plan, all gains are tax-free.

For example, if you purchased a piece of property with your Solo 401(k) Plan for $100,000 and you later sold the property for $300,000, the $200,000 of gain appreciation would generally be tax-free. Whereas, if you purchased the property using personal funds (non-retirement funds), the gain would be subject to federal income tax and in most cases state income tax.

Tax Liens

The IRS permits the purchase of tax liens and tax deeds with a Solo 401(k) Plan. By using a Solo 401(k) Plan to purchase tax-liens or tax deeds, your profits are tax-deferred back into your retirement account until a distribution is taken (pre-tax 401(k) distributions are not required until the Plan Participant turns 70 1/2). In the case of a Roth Solo 401(k) Plan, all gains are tax-free.

More importantly, with a Solo 401(k) Plan, you, as trustee of the 401(k) Plan, will have “checkbook control” over your retirement funds allowing you to make purchases on the spot without custodian consent. In other words, purchasing a tax-lien or tax deed is as easy as writing a check!

Loans & Notes

The IRS permits using 401(k) funds to make loans or purchase notes from third parties. By using a Solo 401(k) Plan to make loans or purchase notes from third-parties, all interest payments received would be tax-deferred until a distribution is taken (pre-tax 401(k) distributions are not required until the Plan Participant turns 70 1/2). In the case of a Roth Solo 401(k) Plan, all gains are tax-free.

For example, if you used a Solo 401(k) to loan money to a friend, all interest received would flow back into your 401(k) Plan tax-free. Whereas, if you lent your friend money from personal funds (non-retirement funds), the interest received would be subject to federal and in most cases state income tax.

Private Businesses

With a Solo 401(k) you are permitted to purchase an interest in a privately held business. The business can be established as any entity other than an S Corporation (i.e. limited liability company, C Corporation, partnership, etc.). When investing in a private business using 401(k) funds, it is important to keep in mind the “Disqualified Person” and “Prohibited Transaction” rules under IRC 4975 and the Unrelated Business Taxable Income rules under IRC 512. The retirement tax professionals at the IRA Financial Group will work with you to develop the most tax-efficient structure for using your Solo 401(k) Plan to invest in a private business.

Precious Metals & Coins

Our Solo 401(k) Plan documents allow for investments into precious metals and certain coins. The advantage of using a Solo 401(k) Plan to purchase precious metals and/or coins is that their values generally keep up with, or exceed, inflation rates better than other investments. In addition, the metals and/or coins can be held in the name of the 401(k) Plan at a financial organization (any local bank) safe deposit box eliminating depository fees.

Foreign Currencies

The IRS does not prevent the use of 401(k) funds to purchase foreign currencies, including Iraqi Dinars. In fact, our Solo 401(k) Plan documents permit the purchase of foreign currencies. Many believe that foreign currency investments offer liquidity advantages to the stock market as well as significant investment opportunities.

By using a Solo 401(k) to purchase foreign currencies, such as the Iraqi Dinar, all foreign currency gains generated would be tax-deferred until a distribution is taken (pre-tax 401(k) distributions are not required until the Plan Participant turns 70 1/2). In the case of a Roth Solo 401(k) Plan, all gains are tax-free.

Stocks, Bonds, Mutual Funds, CDs

In addition to non-traditional investments such as real estate, a Solo 401(k) may purchase stock, bonds, mutual funds, and CDs. The advantage of using a Solo 401(k) Plan with “Checkbook Control” is that you are not limited to just making these types of investments. With a Solo 401(k) Plan with “checkbook control” you can open a stock trading account with any financial institution as well as purchase real estate, buy tax liens, or lend money to a third-party. Your investment opportunities are endless!

For additional information on the advantages of using a Solo 401K Plan to make investments, please contact one of our 401(k) Experts at 800-472-0646.

Dec 13

Helpful Tips For Making Investments with a Solo 401(k) Plan

Solo 401(k) Plan Investments

A Solo 401(k) Plan offers one the ability to use his or her retirement funds to make almost any type of investment on their own without requiring the consent of any custodian or person. The IRS and Department of Labor only describe the types of investments that are prohibited, which are very few.

Tips for your Solo 401(k) PlanThe foundation of the prohibited transaction rules are based on the premise that investments involving a Solo 401(k) Plan and related parties are handled in a way that benefits the retirement account and not the plan participant. The rules prohibit transactions between the plan participant and certain individuals known as “disqualified persons”. The outline for these rules can be found in Internal Revenue Code Section 4975. In general, the definition of a “disqualified person” (Internal Revenue Code Section 4975(e)(2)) extends into a variety of related party scenarios, but generally includes the Solo 401(k) Plan participant, any ancestors or lineal descendants of the plan participant, and entities in which the plan participant holds a controlling equity or management interest.

The following are some examples of types of investments that can be made with your Solo 401(k) Plan

  • Residential or commercial real estate
  • Domestic of foreign real estate
  • Raw land
  • Foreclosure property
  • Mortgages
  • Mortgage pools
  • Deeds
  • Private loans
  • Tax liens
  • Private businesses
  • Limited Liability Companies
  • Limited Liability Partnerships
  • Private placements
  • Precious metals and certain coins
  • Stocks, bonds, mutual funds
  • Foreign currencies

Real Estate

The IRS permits using a Solo 401(k) to purchase real estate or raw land. Since you are the trustee of the 401(k) Plan, making a real estate investment is as simple as writing a check from your 401(k) Plan bank account. The advantage of purchasing real estate with your Solo 401(k) Plan is that all gains are tax-deferred until a distribution is taken (pre-tax 401(k) distributions are not required until the plan participant turns 70 1/2). In the case of a Roth Solo 401(k) Plan, all gains are tax-free.

For example, if you purchased a piece of property with your Solo 401(k) Plan for $100,000 and you later sold the property for $300,000, the $200,000 of gain appreciation would generally be tax-deferred. Whereas, if you purchased the property using personal funds (non-retirement funds), the gain would be subject to federal income tax and in most cases state income tax.

Helpful Tips :

  • The deposit and purchase price for the real estate property should be paid using Solo 401(k) Plan funds or funds from a non-disqualified third-party
  • No personal funds or funds from a “disqualified person” should be used
  • All expenses, repairs, taxes incurred in connection with the Solo 401(k) Plan real estate investment should be paid using retirement funds – no personal funds should be used
  • If additional funds are required for improvements or other matters involving the real estate investments, all funds should come from the Solo 401(k) Plan or from a non “disqualified person”
  • If financing is needed for a real estate transaction, only nonrecourse financing should be used. A nonrecourse loan is a loan that is not personally guaranteed and whereby the lender’s only recourse is against the property and not against the borrower.
  • With a Solo 401(k) Plan the use of a nonrecourse loan would not be subject to any tax pursuant to Internal Revenue Code Section 514, which is not the case with an IRA. This provides a very exciting investment opportunity.
  • No services should be performed by the Solo 401(k) Plan participant or “disqualified person” in connection with the real estate investment. In general, other then typical trustee type of services (necessary and required tasks in connection with the maintenance of the plan), no active services should be performed by the plan participant or a “disqualified person” with respect to the real estate transaction.
  • Title of the real estate purchased should be in the name of the trustee for the benefit of the plan. For example, if Joe Smith is the trustee of ABC 401K Trust, title to real estate purchased by Joe’s plan would be as follows: Joe Smith as Trustee of the ABC 401K Trust
  • Keep good records of income and expenses generated by the real estate investment
  • All income, gains or losses from a Solo 401(k) Plan real estate investment should be allocated to the Solo 401(K) Plan
  • Make sure you perform adequate diligence on the property you will be purchasing especially if it is in a state you do not live in
  • Make sure you will not be engaging in any self-dealing real estate transaction which would involve buying or selling real estate that will personally benefit you or a “disqualified person”

Tax Liens

The IRS permits the purchase of tax liens and tax deeds with a Solo 401(k) Plan. By using a Solo 401(k) Plan to purchase tax-liens or tax deeds, your profits are tax-deferred back into your retirement account until a distribution is taken (pre-tax 401(k) distributions are not required until the Plan Participant turns 70 1/2). In the case of a Roth Solo 401(k) Plan, all gains are tax-free.

More importantly, with a Solo 401(k) Plan, you, as trustee of the 401(k) Plan, will have “checkbook control” over your retirement funds allowing you to make purchases on the spot without custodian consent. In other words, purchasing a tax-lien or tax deed is as easy as writing a check!

Helpful Tips :

  • The deposit and purchase price for the tax lien should be paid using Solo 401(k) Plan funds or funds from a non-disqualified third-party
  • No personal funds or funds from a “disqualified person” should be used
  • A check from the Solo 401(k) Plan account should be taking to auction or used for the tax lien purchase – no personal check or cash should be used
  • No credit card should be applied for in the name of the Solo 401(k) Plan as that would violate the IRS prohibited transaction rules. A pure debit card is allowable
  • All income, gains or losses from tax lien investments should be allocated to the Solo 401(K) Plan

Loans & Notes

The IRS permits using 401(k) funds to make loans or purchase notes from third parties. By using a Solo 401(k) Plan to make loans or purchase notes from third-parties, all interest payments received would be tax-deferred until a distribution is taken (pre-tax 401(k) distributions are not required until the Plan Participant turns 70 1/2). In the case of a Roth Solo 401(k) Plan, all gains are tax-free.

For example, if you used a Solo 401(k) to loan money to a friend, all interest received would flow back into your 401(k) Plan tax-free. Whereas, if you lent your friend money from personal funds (non-retirement funds), the interest received would be subject to federal and in most cases state income tax.

Helpful Tips :

  • The loan or note amount should be paid using Solo 401(k) Plan funds or funds from a non-disqualified third-party
  • No personal funds or funds from a “disqualified person” should be used in the loan transaction
  • The loan or note should not involve a “disqualified person” directly or indirectly
  • The loan or note should have a stated interest rate of at least Prime as per the Wall Street Journal (3.25% as of August 1, 2013)
  • All interest and principal associated with the loan or note should be allocated to the Solo 401(K) Plan
  • It is good practice to have the loan terms documented in a promissory note or loan agreement
  • If you will be acting as the lender, consider securing the loan with an interest or lien in an asset owned by the borrower
  • Make sure you will not be engaging in any self-dealing loan transaction which would involve a loan or note that will personally benefit you or a “disqualified person”

Private Businesses

With a Solo 401(k) you are permitted to purchase an interest in a privately held business. The business to be purchased can be any entity other than an S Corporation (i.e. limited liability company, C Corporation, partnership, etc.). When investing in a private business using 401(k) funds, it is important to keep in mind the “Disqualified Person” and “Prohibited Transaction” rules under IRC 4975 and the Unrelated Business Taxable Income rules under IRC 512.

Helpful Tips :

  • The deposit and purchase price for the business should be paid using Solo 401(k) Plan funds or funds from a non-disqualified third-party
  • No personal funds or funds from a “disqualified person” should be used to purchase the business
  • The purchase of the stock or assets of the business should not directly or indirectly benefit the plan participant personally or any “disqualified person”
  • The purchase of a business operated via an LLC or partnership will potentially trigger the Unrelated Business Taxable Income rules under IRC 512 and a corresponding tax of approximately 35% would be applied
  • Stock of an S Corporation should not be purchased with retirement funds as the S corporation rules only allow individuals to be S Corporation shareholders
  • The purchase of stock of a C Corporation would not trigger the application of the Unrelated Business Taxable Income rules under IRC 512
  • All income, gains or losses from the purchased business should be allocated to the Solo 401(K) Plan
  • The plan participant or any “disqualified person” should not have any ownership in the business being purchased and should not directly or indirectly personally benefit from the acquisition
  • Make sure to perform adequate diligence on the business you will be purchasing or investing in especially if you will be buying the stock/interests and not the assets
  • Make sure you will not be engaging in any business acquisition transaction which would involve buying or selling a business that will personally benefit you or a “disqualified person”

Precious Metals & Coins

Our Solo 401(k) Plan documents allow for investments into precious metals and certain coins. The advantage of using a Solo 401(k) Plan to purchase precious metals and/or coins is that their values generally keep up with, or exceed, inflation rates better than other investments. In addition, the IRS approved metals can be held in the name of the 401(k) Plan at a financial organization (any local bank) safe deposit box eliminating depository fees and the coins can be held in the personal possession of the plan participant or trustee.

Helpful Tips :

  • Only IRS approved metals and coins may be purchases as per Internal Revenue Code 408(m)
  • The IRS approved precious metals or coins being purchased by the plan should be paid using Solo 401(k) Plan funds or funds from a non-disqualified third-party
  • With respect to IRS approved precious metals, the metals should not be held in the personal possession of any individual
  • With respect to the IRS approved precious metals, the metals must be held in the “physical possession” of a U.S. depository or at a U.S. bank
  • With respect to the IRS approved coins, the “physical possession” requirement that applies to precious metals does not appear to apply to coins
  • An affidavit signed by the trustee of the plan confirming that the IRS approved precious metals or coins are being purchased with being held in the sole interest of the plan is good practice
  • All income, gains or losses from the purchased precious metals or coins should be allocated to the Solo 401(K) Plan
  • IRS approved precious metals should not be held at a bank outside the United States
  • Perform adequate diligence on the dealer with which you will be transacting with for the purchase of metals or coins

Foreign Currencies

The IRS does not prevent the use of 401(k) funds to purchase foreign currencies, including Iraqi Dinars. In fact, our Solo 401(k) Plan documents permit the purchase of foreign currencies. Many believe that foreign currency investments offer liquidity advantages to the stock market as well as significant investment opportunities.

By using a Solo 401(k) to purchase foreign currencies, such as the Iraqi Dinar, all foreign currency gains generated would be tax-deferred until a distribution is taken (pre-tax 401(k) distributions are not required until the Plan Participant turns 70 1/2). In the case of a Roth Solo 401(k) Plan, all gains are tax-free.

Helpful Tips :

  • Make sure you have a solid background in trading currencies – high volatile and significant risk
  • If you will be investing with a third-party, perform adequate diligence on the individual and make sure the individual has the knowledge to trade foreign currencies and all his/her securities licenses are in good standing.
  • Beware of leverage – it is allowable but it would trigger the application of the Unrelated Business Taxable Income rules under IRC 512 and thereby a corresponding tax
  • No personal guarantee of any leverage or loan obligation is permitted
  • All income, gains or losses from the foreign currency transactions should be allocated to the Solo 401(K) Plan

Stocks, Bonds, Mutual Funds, CDs

In addition to non-traditional investments such as real estate, a Solo 401(k) may purchase stock, bonds, mutual funds, and CDs. The advantage of using a self-directed Solo 401(k) Plan is that you are not limited to just making these types of investments. With a Solo 401(k) Plan with “checkbook control” you can open a stock trading account with any financial institution as well as purchase real estate, buy tax liens, or lend money to a third-party. Your investment opportunities are endless! When purchasing stocks or securities with a Solo 401(k) Plan, all income and gains, including dividends, would flow back to the plan without tax. With a Roth Solo 401(k) Plan, all gains are tax-free. Whereas, if you purchased stocks with personal funds, all income and gains would be subject to federal and in most cases state income tax.

Helpful Tips :

  • If you will be investing with a third-party, perform adequate diligence on the individual and make sure the individual has the knowledge to trade stocks or securities and all his/her securities licenses are in good standing.
  • Beware of promoters who are promising high returns and that do not work at reputable financial institutions – high likelihood of fraud
  • Beware of leverage – it is allowable but it would trigger the application of the Unrelated Business Taxable Income rules under IRC 512 and thereby a corresponding tax
  • No personal guarantee of any leverage or loan obligation is permitted
  • Open up a brokerage account in the name of the Solo 401(k) Plan – not a personal account
  • All income, gains or losses from the stock investments should be allocated to the Solo 401(K) Plan

If you have any questions about whether your specific Solo 401(k) Plan transaction would potentially be in violation of IRS rules, please contact a tax professional at the IRA Financial Group at 800-472-0646.