Non-Marketable Securities in an IRA
We have a client that holds a non-marketable asset in their IRA (an LP), they liquidated their holdings in the IRA and deposited the proceeds into their brokerage account, not their IRA.
If the 60-day timeframe has passed, can they still deposit those assets into their IRA as a return of capital rather than receiving a taxable distribution?
Permalink Submitted by Alan Spross on Thu, 2008-05-15 17:33
Was the asset removed from the IRA in hopes that the broker of the taxable account might be able to market it? If so, perhaps there is a chance for a favorable ruling, since the IRS has been lenient on 60 day extensions IF taxpayer did not wish to make use of the funds as a short term loan. PLR fees for rollover related issues are much lower than other IRA related fees.
I don’t follow the return of capital issue as a factor here, but may be missing something.
Permalink Submitted by Alanna Crawford on Thu, 2008-05-15 18:05
The client sold the asset from the IRA. He now has a responsibility to return the proceeds (return of capital and any profit/loss) to the IRA, or else it will be considered a taxable distribution. My question is, is the client bound by the 60-day rule to return the proceeds or, because this is not a rollover, do they have more time?
As always, thanks for your assistance!
Permalink Submitted by Denise Appleby on Thu, 2008-05-15 19:25
I don’t think the 60-day rule would be applicable here, since we are not talking about a distribution.
Similar to a liquidation of publicly traded stocks, the proceeds from the sale of the LP should have been deposited to the IRA. One of the differences with the LP is the lapse of time between the sale and receipt funds, and the fact that the transaction is usually not automated-so mistakes often occur.
When the transfer agent ( or general partner) issued the proceeds for the sale of the LP, the proceeds should have been made payable to the IRA Custodian, FBO the IRA, which would limit the account to which it is eligible for deposit to the IRA.
Question: Do we know the payee of the proceeds? If it was the IRA, then the IRA custodian must do an adjustment to move the amount plus earnings (or minus loss) to the IRA. If the payee was not the IRA, then supporting documentation should be provided to the custodian, along with instructions to make the adjustment. Since they held the LP, it is likely that they already have the supporting documentation on file. But if they do not, then the transfer agent should provide the documentation.