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Alan posted on October 20, 2008, 2:52 pm
of years ago via an IRA conversion that has lost value. Cost
basis is $20,000. Tax situation is such that he instructs the
trustee (broker) to close the account by distributing the stock
and cash from the Roth into his taxable asset account. Trustee
transfers stock valued at $9500 and cash of $500. Taxpayer now
has a Roth IRA loss of $10,000 which is deductible on Schedule A
as a miscellaneous itemized deduction subject to the 2% limitation.
Cost basis of the stock in the taxable investment account is now
$9500. Am I correct that the holding period for the stock is the
date of transfer? I couldn't find any guidance on this, so I
assumed it is handled as if the stock had been liquidated in the
Roth IRA and cash transferred and new stock purchased.
I am aware of the AMT considerations.
Comments please.
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Phil Marti posted on
Re: Loss On Roth IRA
Yes. IIRC this is mentioned in Pub 590, but they have a nasty habit of
hiding things in that Pub. Try the section on required distributions in
Chapter 1.
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Phil Marti
Clarksburg, MD
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Arthur Kamlet posted on
Re: Loss On Roth IRA
See item 9.12 on page 6 of this custodial agreement:
http://www.hussman.net/pdf/hitroth.pdf
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ArtKamlet at a o l dot c o m Columbus OH K2PZH
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Re: Loss On Roth IRA
9.12 discusses valuation, not holding period.
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Re: Loss On Roth IRA
Right. It was the closest I found, and makes sense that
the date for valuation is also used as acquisition
date. Sure, there are exceptions to this rule, such as
inherited property, but such an exception would probably be
well known if true.
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ArtKamlet at a o l dot c o m Columbus OH K2PZH
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Re: Loss On Roth IRA
I've actually dug into the Code on inherited property, and contrary to what
one might think, the holding period begins when the legatee takes title.
The reason any gain if it's sold in the first year of holding is that the
holding period is ignored when determining whether a cap gain is treated as
short- or long-term when the property was inherited.
As I recall we looked into this during the discussion of the "super long
term" gains that were in the law for a while but never actually had
application on returns.
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Phil Marti
Clarksburg, MD
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Brew1 posted on
Holding period for inherited property (from Loss on Roth IRA thread)
I think I'll put this under another thread.
I've never heard of inherited property (under current law) being
treated as anything but
long term--so why would a holding period even be assigned? Our
software for the 1041
and for the 1040 automatically enters LT for such assets and fills in
the date of purchase
as "inherited."
Relevant code sections are 691, 1014, 2032, 2032A (for basis of
inherited properties).
If the code is left alone, we will have those "super long term" gains,
if you were referring
to the 18% rate for assets held 5 years.
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Re: Holding period for inherited property (from Loss on Roth IRA thread)
See there? You answered your own question. As I mentioned before, that's
the context in which we discussed a holding period for inherited assets.
Otherwise I can't think of any reason for caring.
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Phil Marti
Clarksburg, MD
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Re: Loss On Roth IRA
Nada on holding period. I just know it has to be the date of
distribution as an earlier date makes no sense. I'm just looking
for some form of guidance other than a post at fairmark.com on
in-kind distributions.
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D. Stussy posted on
Re: Loss On Roth IRA
$500.
Distribution date - because a taxpayer and his IRA are separate tax
entities.
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Re: Loss On Roth IRA
Of course they are close enough for wash sale purposes.
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ArtKamlet at a o l dot c o m Columbus OH K2PZH
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Re: Loss On Roth IRA
The recent IRS ruling on wash sales that dealt with retirement
accounts involves taking a loss in your taxable investments and
buying substantially equivalent securities in your retirement
account +/- 30 days from the sale.
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Re: Loss On Roth IRA
I know it has to be the distribution date... I was just hoping
that there was some guidance floating around.
As to they being different tax entities, they are related
parties. One might argue that moving the shares from one related
party to another related party is nothing more than a refinement
of title. The IRS used that logic in RR 08-05, where they deny a
loss under the wash sale rule when you buy the same securities
within +/- 30 days in your retirement account after taking a loss
in your taxable account.
I think the argument is that the shares inside a tax deferred
retirement account have no holding period. As such, there is no
holding period to transfer to the shares now residing in the
taxable account.
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Gil Faver posted on
Re: Loss On Roth IRA
If the basis is determined at the date of the distribution, I would think
the holding period would run from that date as well.
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Tom Russ posted on
Re: Loss On Roth IRA
So, does the denial of the wash sale loss then create a basis in the
IRA, so that when the funds are eventually withdrawn, some proportion
will not be taxed? Shouldn't this be similar to making post-tax
contributions to the IRA account? Would one have to file a form 8606,
then?
With a wash sale, the loss isn't denied, but merely suspended (and
added to the basis of the re-purchased shares). If this same logic
applies to a purchase inside an IRA, it would seem that it would
create basis in the IRA, then, wouldn't it? [OK, we all know that
logic and fairness isn't expected, but what about this case?]
Also, just as a point of curiosity, how did the IRS even find out
about the purchase in the retirement account? That isn't information
that is reported.
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Re: Loss On Roth IRA
No. Creating a wash sale via acivity in an IRA does not
create basis in the IRA.
Sale at a loss to a related party also disallows a loss,
with no relief available.
How does the IRS even find about purchase of a security in a
regular brokerage account?
I am discussing what the law says, and not playing audit lottery.
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ArtKamlet at a o l dot c o m Columbus OH K2PZH
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