In-kind corporate conversion from Traditional to Roth IRA
I want to do an in-kind transfer of some corporate bonds from my Traditional to Roth IRAs. I know I will have to pay taxes on the values of the bonds but most have been trading below the values show in my summary brokerage summary and some haven’t traded in a few weeks. I assume that the 1099-R amount will be based upon this ‘summary’ value. Could I instead get sell quotes on the bonds on the date of the transfer and use this as the value. Will I have to convince the broker to make the change to the 1099-R or could I just include the updated information on with my return?
Permalink Submitted by Alan - IRA critic on Tue, 2020-04-28 00:08
The IRA custodian is required to report the fair market value of any security distributed from an IRA on Form 1099R. How that value might diverge from the value shown on your statement is not clear, but if IRA distribution income shown on line 4b of Form 1040 (and on Form 8606 reporting the conversion) differs from the 1099R amount, IRS computer matching will catch it and send you a Notice. If you take this up with the IRS, they will simply refer you to your custodian, the 1099R issuer. Right after you do the in kind conversion you will know what value will be transmitted to the tax Dept of your custodian. This is when the custodian transfers this figure to their tax Dept for eventual 1099R preparation in January. So while I very much doubt you will be able to change their mind, the best chance is to appeal this prior to the 1099R issue date if you don’t like the value shown on your IRA statement.