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Updated over 10 years ago on .
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Solo 401K
Can you do a flip with a SD Solo 401K . Do I need to open an LLC in the SD Solo 401K to do the rehab? Any info would be appreciated. Also is a step son a legal person to deal with in a SD account?
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This is a topic that has been covered extensively with BP. Check the forums.
A Solo 401k may flip properties. You or a disqualified party may not perform any of the work. You are limited to administering the Solo 401k funds - signing contracts, paying for expenses, receiving income.
Gains from flips are considered a business, and therefore subject to a trust tax known as UBTI. This tax does not apply to passive earnings such as interest on a hard money loan.
Your step son is {technically} not a disqualified party to your plan, but caution is advised.
This can be a very profitable way to grow your retirement savings, but involved several complexities. You should absolutely speak with an industry professional and/or your tax advisor before proceeding.