While it's widely understood that you personally transacting with your retirement plan is prohibited, there's an exception where it could be considered acceptable.

In some cases, you can be a tenant-in-common with your retirement plan for a real estate investment. 

However, the rules regarding when you can enter a deal with your retirement plan are strict and must be followed exactly.

For most accountholders, this is more confusing the profitable and this particular investment structure will not apply to most accountholders.

Summary: You can only be a tenant-in-common on a property with your retirement account if you both don't need the other to complete the transaction.

Example:
You find a property you'd like to buy.
The price of the property is $400,000.
You decide to put in $200,000 from your personal funds and $200,000 from your retirement funds, in other words, 50/50 ownership.

Put simply, you would need the ability to verifiably prove that there is least $400k in the 401k trust and at least $400k personally to enter this transaction compliantly.

In other words, if you need the other party to complete the deal, it's a prohibited transaction. 

If you need a loan for any part of the $200,000 for either party, you should not proceed with the transaction as it would be disqualified. 

If each party has plenty of cash and can complete the deal without needing the other party, then it's acceptable to partner with your retirement account.

NOTE: If you require a loans for either party to complete the transaction, you should not proceed as it would be a prohibited transaction.

This concept was explained in Department of Labor (DOL) Advisory Opinion Letter 2000-10a.  A DOL Advisory Opinion is when the government makes things official and puts their opinions in writing, usually as a result of someone going to tax court.

You can read advisory opinion 2000-10a here.

Tenant-in-Common Examples

If each party has plenty of cash, and doesn't need to partner, and you choose to proceed with the transaction, ownership and profit should be split accordingly:

50/50 Ownership Split between you and your Solo 401k trust:

  1. Record the deed as 50% undivided interest for you personally and 50% undivided interest in the name of your Solo 401k trust.

  2. Profits are split 50/50 between the two owners

  3. Expenses are split 50/50 between the two owners

  4. No loan may be obtained by either party

75/25 Ownership Split between you and your Solo 401k trust:

  1. Record the deed as 25% undivided interest for you personally and 75% undivided interest in the name of your Solo 401k trust.

  2. Profits are split 25/75 between the two owners

  3. Expenses are split 25/75 between the two owners

  4. No loan may be obtained by either party

IRS Prohibited Transaction rules still apply, so you cannot purchase the property from another disqualified party, such as your parent, spouse or child.

What to do if you don't have enough money to complete the transaction compliantly

 If you're buying a property, but don't have enough to pay for it outright, the Solo 401k can to get a mortgage in the form of a non-recourse loan.

Here are some articles from our Knowledge Base that can help:

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