IRS Rules
7 articles
Prohibited Transactions
4 articlesCan I sell assets to my plan?
No. A sale or exchange of property between a retirement plan and a disqualified person is a prohibited transaction under IRC Section 4975(c)(1)(A), regardless of the terms or price involved. !!! Why fair market value doesn't make it legal This is one ...
Can I lend money to or borrow from my plan?
It depends on the plan type and the direction of the loan. Extensions of credit between an IRA and a disqualified person in either direction are always prohibited. A Solo 401(k) is the exception; it allows you to borrow from your own plan under ...
What is sweat equity and why is it prohibited?
Sweat equity refers to performing personal labor or services on assets owned by your retirement plan. It is prohibited because IRC Section 4975(c)(1)(C) bars the furnishing of goods, services, or facilities between a plan and a disqualified person. ...
Can I use plan assets personally?
No. IRC Section 4975(c)(1)(D) prohibits any transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a plan. Personal use of plan-owned assets, in any form, is a prohibited transaction. The rule applies ...
UBIT & UDFI
3 articlesIs the Solo 401(k) exempt from UDFI?
Yes, a Solo 401(k) has an exemption from certain types of Unrelated Debt Financed Income (UDFI), which makes this the preferred plan for eligible real estate investors. IRC Section 514(c)(9) exempts qualified retirement plans, including Solo 401(k)s, ...
How do I calculate UDFI liability?
UDFI liability is calculated using a debt-financing ratio that determines what percentage of your plan's income is attributable to borrowed funds. That percentage, not the total income, is what becomes taxable. The actual calculation involves several ...
When and how do I file Form 990-T?
Form 990-T is the Exempt Organization Tax Return filed when a retirement plan owes Unrelated Business Income Tax (UBIT). Filing is required when gross UBTI or UDFI income exceeds $1,000 in a tax year. The return is filed on behalf of the plan, not on ...