Growing Solo 401K via Note to Trustee?

[Account Closed]

I have a self-directed 401K (solo 401k), and purchasing real estate for buy and hold. However, I would like to grow it by taking after tax dollars (W2) and issuing myself a promissory note of 50K but instead of doing “minimum” payments of prime + 1%, could I artificially increase it to say prime + 5%? Is there a max limit? Also checking with my custodian but wanted to solicit input on whether that would be ”prohibitive”. Thanks for the input.

[George Blower]

@Daniel Chow

The general IRS guideline is to use the current prime rate plus one point at time of the loan. The IRS is just as concerned of the participant paying a higher rate which can be seen as a way to exceed the solo 401k annual contribution rules or to get more funds into the plan.