tax consequences of liquidating retirement question

[Chris Mason]

Hello Wise Tax Professionals,

Quick question for you. I'm not actually in a position to do the below, but I'm going to be a hypothetical person with a crap ton of money in retirement accounts, a mix of 401k and IRA.

- I want to be a cash buyer to get the cash buyer's discount and pick of the litter of homes.

- I can do it only by liquidating my retirement accounts.

- OK, great, I do that and close on the cash purchase at a discounted price.

- I line up a rockstar lender and get a FNMA Delayed Financing Exception cash out refinance, and about X days after liquidating my 401k and IRA to purchase the home, I now deposit all the liquidated funds right back into those same retirement accounts.

- Once I live there for 2 years, I get the Sec 121 exception, meaning that instant equity from the discounted price will effectively be tax free income for up to $250k single / $500k married, when/if I go to sell.

Questions...

I've heard folks say that if you re-deposit it within 60 days (and have a tax professional do the relevant paperwork), there are no tax consequences. Is that accurate? Is that for 401ks, IRAs, or both? Are Roth 401k/IRAs any different? Does anyone know about the California employee retirement accounts, CalPERS etc? What about TSAs? Aside from Sec 1031 being applicable instead of Sec 121, will it matter if this is for an investment property? 

Thanks!

[Roger StPierre]

Chris,

Why don't you just set up a Self Directed IRA or Solo 401K Trust (if that type of entity is permissible). Then transfer or rollover the existing IRA or 401K funds into that new Self Directed Retirement entity/account. Then when that hot deal comes along, just pay cash from the SDIRA. If you want, you can later leverage that home or rental asset in the retirement account with a non recourse loan and put that money back into the self directed retirement account so that there are now more funds for future investments. There are several providers of self directed retirement accounts that frequent Bigger Pockets, or do your research and find the best fit for your plan.