Converting property in 401k to Roth
My Solo 401k owns a rental property. If I determine that it is better to pay the taxes on the value in the 401k now, could I convert the property and other cash in the account into a Roth 401k without selling and liquidating the property?
Yes, you can convert property and other assets in your 401k to Roth.
- Roth conversions are taxable events. Please speak with your CPA prior to performing a Roth conversion in order to understand the tax consequences.
- For a Roth conversion of property, you must use a licensed third party appraisal to determine the accurate value of the property
- The appraisal must be dated as close as possible to the taxable event
How do I value real estate in my Solo 401k plan?
- You would then follow the instructions for performing a Roth conversion, starting with "Complete the In-Plan Roth Conversion form..."
Performing a Roth conversion
- Since this is not a movement of cash, you would not necessarily need to "Open a separate 401k account for the Roth funds" and "Move the funds from the pre-tax 401k account to the Roth 401k account" as noted in the above link