Closely Held Stock Rollover

Submitted by Nick Pappas on Thu, 2013-10-31 13:58

A client has a SEP IRA with shares of a closely held corporation in it. There is no “market” for these shares except for a small group of people. The client wishes to take the shares out of the SEP, sell them and put the proceeds back in to another IRA. Would this be considered an indirect rollover for tax purposes? Is there a better way to accomplish this?

Thanks in advance,
Nick



Submitted by Alan - IRA critic on Thu, 2013-10-31 19:27

  • Nick, unlike qualified plans, there is a rule that applies to IRA accounts that requires the same property this is distributed to be rolled over. Therefore, client cannot sell the shares and roll over the cash proceeds.
  • Possible solutions: 1) Roll the SEP into an employer plan or solo K, then distribute the shares, sell them and roll the cash to whatever plan he wishes. Note that even with this alternative, he cannot keep the shares in a taxable account and substitute cash to complete the rollover.  2) Or transfer the SEP IRA shares to an IRA custodian who can work with the potential buyers. This may require a self directed IRA custodian.

Submitted by Nick Pappas on Fri, 2013-11-01 14:58

Thanks so much!

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