For an IRA account, if a fund (e.g. REIT) gives me Return of Capital, do I need to keep track of this? Correct me if I'm wrong, but generally the cost basis of the REIT won't matter, since when I withdraw money from the IRA (after retirement age of course), I am going to be taxed on the amount of money withdrawn.
Thank you
Correct. Nothing matters within the IRA.
Ira Smilovitz
In other words what [profit or loss] happens in the IRA says in the IRA? ;-)
I'm thinking about Form 8606. If you are in the relatively rare situation of a non-Roth IRA to which you've made non-deductible contributions, don't you need to reduce the basis by the amount returned times the nondeductible percentage of contributions?
The fund didn't give you a return of capital, it gave the IRA one. The IRA and it's owner are separate entities. Because the owner didn't receive anything, the owner has nothing to report. As the IRA doesn't report transactions within the IRA, it doesn't have anything to report either.
Of course if your IRA owns something that throws off over $1000 of unrelated business taxable income, the IRA custodian has to file a 990-T to report it and pay the tax on it.
And it is possible to buy a stock in your IRA that creates a wash sale from an ordinary account.
Form 8606 is used to reduce basis due to distributions from the IRA, not returns of capital within the IRA.
Ira Smilovitz
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