WHAT IS ALLOWED?
CAN i CONVERT A STOCK BROKERAGE ACCOUNT INTO AN IRA? EVEN IF I HAVE A 401K ALREADY?
WHAT IF SOME OF THE STOCK IS COMPANY STOCK PURCHASED VIA THE STOCK BUYING PROGRAM AS AN EMPLOYEE?
HOW MUCH CAN BE CONVERTED IN ONE YEAR IN ORDER TO TAKE THE IRA CONTRIBUTION DEDUCTION IN A GIVEN TAX YEAR? SHOULD I CONVERT IT IN PIECES TO GAIN THE DEDUCTION OVER A FEW YEARS?
IS AN IRA CONTRIBUTION DEDUCTION ALLOWED EVEN THOUGH I HAVE A 401K VIA MY EMPLOYER?
WOULDN’T THE STOCK IN AN IRA BE A BETTER PLACE UPON RETIREMENT THAN HAVING IT SIMPLY AS A PERSONAL ACCOUNT AND THEN BEGINNING TO SELL THE STOCK AND TAKE INCOME?
Permalink Submitted by Alan Spross on Mon, 2008-09-01 22:44
You cannot “convert” a taxable account to an IRA. You would have to sell the stocks in the taxable account, then open an IRA account and contribute the cash to the IRA. Since you are a 401k participant, there are income limits above which you cannot deduct the contribution or make a Roth IRA contribution. If your income exceeds those limits, you can still make a non deductible IRA contribution. Conversions to a Roth IRA can be made from a traditional IRA starting in 2010 with no income limitation.
When you sell the stock in your taxable account, capital gains taxes may be due if the stock sells for more than your basis. Your basis for stock purchased in an employer stock purchase program is the cost per share for which you paid with taxable income.
Stock gains in an IRA are taxable as ordinary income when you take distributions from the IRA, whereas the sale of that stock in a taxable account will get the lower LT cap gain rate. However, it is possible that the current low LT cap gains rates will be increased by Congress.
Permalink Submitted by JOEL COHN on Tue, 2008-09-02 01:00
Appreciate the information