Stock in a Qualified Plan
I have initiated a rollover from a Stock Fund to Certificates of the stock from an employer quaified plan. The previous Custodian would not allow us to send the Certificates to the new Custodian, instead they sent them to the transfer agent. The problem is that they have the account set up in the individual’s name and not as an IRA fbo the individual. Is this correct?
If we can get the stock into a newly established IRA within 60 days, will that be sufficient to complete the transaction properly?
Thank you for your help.
Permalink Submitted by Alan Spross on Wed, 2009-11-11 18:51
Are these shares to be rolled into an IRA, or is this employer stock with NUA (net unrealized appreciation)? When NUA is applied, the shares must be transferred to a taxable account as NUA cannot be used once the shares reach an IRA account.
An employer stock fund qualifies for NUA, but stock certificates must be produced to replace the fund shares. Perhaps this is what is going on here.
If an employee changes their mind about NUA for any reason, they CAN roll over the stock shares to an IRA within 60 days of receipt. They will then avoid the ordinary income tax on the cost basis of the shares and just report a full rollover on Form 1040, line 16. They CANNOT sell the shares and report LT gains and roll the proceeds over to the IRA.
Permalink Submitted by [email protected] on Wed, 2009-11-11 19:40
Thank you for your response. We were not trying to take advantage of the NUA. So, I think the previous custodian has made a mistake.
If he does not have the certificates, but a DRS account at BNY Mellon, when does the 60 day window begin?
Denise
Permalink Submitted by Alan Spross on Wed, 2009-11-11 20:43
The 60 day window starts when the client has constructive receipt of the funds. If client can do any transactions in this account, he has constructive receipt of the shares.
That said, there are some automatic waivers of the time limit per p 24 of Pub 590, and other waivers if there were errors made by financial institutions, client disabilities, etc.