Prohibited Transactions: What a Solo 401k Plan Owners Should Know
Plan owners of the Solo 401k and self-directed IRA have many flexibility and control over their retirement accounts. However, the plan owners need to be aware of prohibited transactions and how that can affect their plan. Watch the latest Solo 401k video to learn more about the types of Solo 401(k) prohibited transactions to avoid as a plan owner.
Solo 401(k) Prohibited Transactions
There are 3 types of prohibited transactions:
First is the Direct Prohibited Transaction. This happens when the plan engages in a transaction with a disqualified person. Examples of disqualified persons are the plan owner, their spouse, children or parents.
The second is the Extension of Credit Transaction. This occurs, for example, when a disqualified person guarantees a loan for a Solo 401k plan.
The last type is the Self-Dealing Transaction, which is when a disqualified person receives personal benefits from a Solo 401k investment. For example, if a real estate broker uses his Solo401k funds to purchase a property and receives a sales commission.