Buy land through Solo 401K or Cash based on future land use

5 Replies

I am in the process of buying some land, I have a Solo 401K that I can use to buy the land.  I plan to hold the land for at least 5 to 10 years.  I also plan to do some light farming on it-a fish pond, raise some cattles, plant some fruit trees and vines.

Option 1.  Buy the land through Solo 401K and lease the land to my farming operation.

Option 2.  Loan money to myself to buy the land.

Which is a better option?  Better in the sense that leasing the land to my farming operation is permissible by the rules of Solo 401K?

Any help will be appreciated!

charlie

@Charlie Liu  

If you intend to farm the land, you absolutely cannot use 401k funds for the purchase.  Your business is a disqualified party to your plan.

Option 2.

Option 1 would be self dealing and as such your account would be considered distributed since you had violated the terms of the tax deferred status.

Agree with the above comments. First option is illegal. 

Great, thanks for all the replies.  I will go with a loan from Solo 401K to purchase the land.

Appreciated!!!

charlie

How about another option.

I am trying to figure out the best option to do this one.

Option 3:  buy land through solo 401k do all the above mentioned farming activities through solo 401 k as well, pay contractors to do these activities?

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