Taking property out of a Solo 401k plan as an in-kind distribution

My Solo 401k plan owns a real estate property. I would like to pull this property out after retirement as a distribution. Can I do that and what are the specifics?

Answer:

You can distribute the real estate property from the Solo 401k plan. This is known as an in-kind distribution.

An in-kind distribution is still subject to income taxes and early distribution penalties if you are under normal retirement age at the time of the distribution.  The end result is that you now own the real estate personally, outside of the Plan. You can thus use it personally (as residence or rental property, for example) because it is no longer held in the Solo 401k.

IMPORTANT: Before processing an in-kind distribution of real estate from your Solo 401k plan, the property must be appraised in order to ensure income tax and early distribution penalty is paid on the correct value. Not obtaining an appraisal on the property prior to the in-kind distribution may subject you to payment of back taxes if the real estate property was worth more at the time of the distribution.