Assignment: Patron had been told that a 401(k) could be used to convert a primary residence into tax-deferred rental income property and wanted to know how to do this.

Work Performed: Scheduled 20-minute phone call to discuss.

Outcome: Explained Section 4975 of the Internal Revenue Code to the patron and why this particular transaction would not be allowed. Suggested 3 alternative approaches that might achieve the patron's objectives while still being allowable by IRS regulations.

Benefits:

  • Patron avoided a prohibited transaction and associated penalties

  • Savings in time, effort, and expense of pursuing a strategy only to find out later it couldn’t be done

  • Much greater awareness of allowable real estate investments with a Solo 401(k) or self-directed IRA; patron will look for other investment opportunities with this knowledge in mind.

Total Cost: $8