Cap call prohibited transaction guidance

[Bryan DeFoe]

Hello All, I’m evaluating whether to participate in preferred equity capital calls for two syndications: 

1 - I originally invested via my personal trust and via my solo 401K. I’m now considering contributing the full capital call amount from the solo 401K.

2 - I originally invested through my personal trust, and I'm now considering contributing the full capital call amount from my Roth IRA (via SDIRA).

In both cases, the sponsor would credit my new contribution toward my original investment for purposes of fulfilling the capital call and converting the existing equity into preferred equity. The new funds are being invested in a separate preferred equity vehicle, but the benefits would flow to the entire original investment.

My key question: Does using retirement funds (solo 401K or Roth SDIRA) to support a deal where my personal trust also holds equity create a prohibited transaction under IRS rules, even if the entities are technically investing in different vehicles?

I’m aware that indirect benefit to a disqualified person (like myself or my trust) could raise concerns. I’d appreciate views or a referral to someone familiar with ERISA and retirement-plan investing in syndication deals.

[Chris Seveney]

Quote from @Bryan DeFoe:

Hello All, I’m evaluating whether to participate in preferred equity capital calls for two syndications: 

1 - I originally invested via my personal trust and via my solo 401K. I’m now considering contributing the full capital call amount from the solo 401K.

2 - I originally invested through my personal trust, and I'm now considering contributing the full capital call amount from my Roth IRA (via SDIRA).

In both cases, the sponsor would credit my new contribution toward my original investment for purposes of fulfilling the capital call and converting the existing equity into preferred equity. The new funds are being invested in a separate preferred equity vehicle, but the benefits would flow to the entire original investment.

My key question: Does using retirement funds (solo 401K or Roth SDIRA) to support a deal where my personal trust also holds equity create a prohibited transaction under IRS rules, even if the entities are technically investing in different vehicles?

I’m aware that indirect benefit to a disqualified person (like myself or my trust) could raise concerns. I’d appreciate views or a referral to someone familiar with ERISA and retirement-plan investing in syndication deals

 @dmitriy fomichenko or brett sinicky could answer this