Pricing of Securities for Distribution
Have a question on what the standard protocol is for the pricing/valuation of securities being distributed from a retirement account…
In the past, I have gone with it strictly as the closing value of the security in question on the exact date the shares are distributed from the clients account…This way everyone involved is on the same page and you always have a reference point to go back on…
Recently, I ran into a situation where the firm that was making the distribution of shares (these are internal journal entries from the IRA to the personal account) is using IntraDay pricing…What that turns out to be is simply doing a real-time screen shot of the client account and whatever the value was a the time that the screen shot was done, is being utilized for the valuation and the hard figures that are sent on to the IRS for reporting purposes…
Any thoughts ??
Gregg Guiol
Permalink Submitted by Alan Spross on Fri, 2009-01-30 18:32
Gregg,
I have never been able to find a requirement in the tax code for this valuation similar to what applies for the basis of securities at the owner’s death.
Therefore, it appears that the valuation is left up the business practices of the IRA or QRP custodian. If so, there will be variances in how this is done, and I am not even sure that these procedures will be consistent over all possible asset classes that can now be held in retirement accounts.
One possibility here is that if a plan holds assets that can only be valued at the close of trading, it could opt to value all the holdings at that time even those that traded throughout the day. Others might opt to use the valuations first available when they can pull them up.
The IRS is probably OK with anything that is not unreasonable.
Permalink Submitted by Denise Appleby on Fri, 2009-01-30 19:43
According to the IRS, the value should be the value of the assets on the date the distribution occurs.
If withholding is being performed, then they can use the previous day’s value-just for determining the withholding.
Permalink Submitted by Clyde Wolf on Sat, 2009-01-31 01:44
[quote=”[email protected]“]Gregg,
I have never been able to find a requirement in the tax code for this valuation similar to what applies for the basis of securities at the owner’s death.
[/quote]
Alan-oniras,
The adjusted basis of a security after the owner’s death is the median of the high and low for the date of death (or alternate evaluation date).
If the date of death (or alternate evaluation date) is a non-business day the next business day is to be used.
Permalink Submitted by Alan Spross on Sat, 2009-01-31 04:27
Right. I meant that a specific formula like the one that exists for valuing securities at death does NOT exist for the valuation day on which securities are distributed from a retirement account.
On the particular valuation date, therefore, a plan might value certain assets at the days closing price and other assets at any point during the day they please, perhaps when they get around to pulling up the value of each distributed holding. You could not go to historical prices a few weeks after the distribution and try to figure out what they did like you could with a death situation.