Father's gift of stock to adult child's Roth account

No.

Contributions to a Roth IRA or traditional IRA have to be in cash no in kind.

Nope. New contributions must be in cash. One can convert TIRA to Roth IRA, but that's about the only exception.

You can't deposit stock into the Roth. The dad can gift shares to the son, who can sell them, and be subject to the cap gain. He can then deposit the cash to the Roth.

For sake of completeness, withdrawal can be made in-kind. An IRA RMD for instance, does not have to be a stock sale. One can withdraw the shares, transferring them to a cash account and the shares are valued as of the transfer date to satisfy the RMD. Of course tax is then due, and the shares then have a basis equal to the value used at distribution.

In addition to the other points, does your son have a job (W-2 or self- employment income)? You can only contribute to an IRA if you have this type of income. So if you gift him $5000 cash and he makes only $3000 in his job, he only only contribute $3000 to his IRA's.

Second, if you gift him more than $13,000 of F stock, you have to deal with gift tax issues. I suspect the amount is less than $5000 otherwise you wouldn't think of putting it into a Roth, so this point is probably not important. But in general it could be a taxable event for the father (there are concepts like: both you and your spouse giving, gift splitting tax returns, lifetime exemption, gift tax).

Contributions to a Roth IRA or traditional IRA have to be in cash no in kind.

ArtKamlet at a o l dot c o m Columbus OH K2PZH ============I think you are wrong. I make my required Rollover IRA withdrawals by transferring stock into my margin account. I see no reason why I couldn't transfer from my margin account or my Rollover IRA into my Roth IRA. If I made a transfer from the Rollover to the Roth, it would be a taxable withdrawal from the Rollover and would go into the Roth at the market value on the transfer date.

There would be no more tax advantage than if I withdrew cash from the Rollover and bought stock in the Roth IRA.

I see no reason why a gift of stock could not go into a Roth IRA.

I did not bring up these points because none of them are at issue. For reference, the son is over 50, so elegible for $6000 for 2011. Minimum earned income exceeded, maximum income limit does not apply, nor do the amounts involved approach $13K total.

What is confusing is that the broker handling the transfers, who is setting up the Roth account, has already furnished forms for doing transfers in kind. We're pushing back to determine what the custodian says.

Hank

Apples & peanut butter. Very different things.

If you want to spend time understanding taxes, first thing, throw out all attempts to view the rules as if they were logical.

Reiterating, you cannot make an in-kind contribution to an IRA,

Converting your Rollover IRA to a Roth IRA is a conversion. Whole different thing. However I do have a gripe with the IRS who use the term "conversion contribution." It's a conversion.

Your broker can sell the shares and move the funds from that sale into a Roth IRA but that's not an in-kind contribution,. It is a taxable, reportable sale followed a few seconds later by a contribution of cash.

You can certainly expect a 1099B from that sale.

You can't transfer stock into a Roth account - all contributions to an IRA must be in cash, not property. So either the father or the son would have to sell the shares and be liable for the capital gains tax before the cash could be contributed.

The contribution could not exceed the current $5,000/$6,000 annual limit.

The contribution could not exceed the son's earned income for the year.

The son's modified AGI would have to be below the current limit for Roth contributions ($122K for single, $179K for MFJ).

Don EA in Upstate NY

From Pub 590, page 9. Contributions, except for rollover contributions, must be in cash.

If I ever found myself disagreeing with Art/Stu/Dick, among others, I'd research before calling them wrong. If the custodian allows this, it's they who are incorrect.

Are the forms actual IRS forms? What is the form number?

Agreed. However, stock can be rolled over. However, the father would have to be dead and the son a beneficiary, and even then, rolling over an inherited account into an account with non-inherited assets is not allowed for a non-spouse. 26 U.S.C. 408(d)(3)(C) seems to also disallow rollovers from an inherited account to a new account even if the assets are segregated into their own account (of only inherited assets) - thus meaning that a beneficiary cannot change the trustee of the account. I find that overrestrictive.

IRC 408 deals with distributions from retirement accounts. In this case, the Ford stock is the the father's taxable account. If he dies and the son inherits, it still is not from a retirement account.

Don EA in Upstate NY

I didn't say it was. I was merely addressing transfers in kind to such an account.