ROTH IRA Cash/Stock transfer
Is it possible to take private stocks that I own (maybe my company stocks) and exchange them for some of the cash in my IRA if the stock is Schwab-approved?
Is it possible to take private stocks that I own (maybe my company stocks) and exchange them for some of the cash in my IRA if the stock is Schwab-approved?
Permalink Submitted by Alan Spross on Thu, 2008-09-18 18:44
No. Any new regular IRA contributions must be made in cash.
I am not sure what you mean by company stock, but if you own controlling interest in the company you cannot hold its stock in your IRA, as that is a prohibited transaction.
Permalink Submitted by Erik Gibbons on Thu, 2008-09-18 19:29
I don’t exactly mean a new contribution per se, but rather just a swap of assets.
And by company stock I basically just mean an employee with some stock ownership of that company, not necessarily the majority share.
Any different?
Permalink Submitted by Clyde Wolf on Thu, 2008-09-18 20:44
Egibbon1,
No, the transfer you are seeking can not be done.
Some of the problems, What would the stock for cash value be? Would it be what you paid for the stock? Or current value? Or something else?
If you have a long term gain on the stock, you may be wise to sell the stock to get the cash you seek.
If you have a long term gain on the stock, putting into your Traditional IRA would mean taking a distribution you would pay ordinary income tax on your LTCG.
If you have a loss on the stock, you can take your loss and use the loss to offset future gains and ordinary income at $3,000 per year.
If you have a need for the cash and want to keep the stock, you can always take a distribution from your IRA and pay all taxes and penalties that may apply.
Permalink Submitted by Clyde Wolf on Fri, 2008-09-19 00:58
Egibbon1,
In the above post I wrote about putting the stock into a Traditional IRA. I see you are working with a ROTH IRA. That does not change my answer.
The question still remains what is the stock value going into the ROTH IRA?
If you want your IRA to own some company stock then have the IRA buy the stock with your next contribution or with cash in the IRA, or sell something in the IRA and use that money to purchase the shares of stock.
Permalink Submitted by Ed Gunnell on Fri, 2008-09-19 02:10
Eg,
To add a little clairification (or perhaps said in English that is simple enough for a dumb Hoosier like me to understand), you can always buy stock in your IRA provided your custodian will hold it for you. If however I understand you correctly, you have cash in your IRA & have some stock burning a hole in your pocket. As Alan & Cwolf said, this is prohibited because you cant sell yourself something into your IRA that you already own outside of your IRA. I believe the correct phrase on that is self-dealing, but someone please correct me if I’m wrong.
For all you IRA-know it alls, would it work if he bought someone else’s stock from them with the cash in his IRA? My understanding is that as long as there’s no direct or controlling relationship, this would not be prohibited. If this is legite, he could find a buddy at work that wants to sell to him.
I’m interested in everyones’ thoughts & shoot me down if there’s something I missed here…
Permalink Submitted by Alan Spross on Fri, 2008-09-19 02:27
Yes, he could do that, BUT the price paid would have to be a fair market value for the shares. Buying at a bargain price for the IRA supplemented with outside funds would result in an excess contribution to the IRA.