Stock Rollover
My client took a stock distribution from her IRA and then returned the stock to the same IRA as a Covid related rollover. The stock increased in value by $30,000 during that period. Is there a tax consequence to my client?
My client took a stock distribution from her IRA and then returned the stock to the same IRA as a Covid related rollover. The stock increased in value by $30,000 during that period. Is there a tax consequence to my client?
Permalink Submitted by Alan - IRA critic on Fri, 2021-03-19 22:55
No. The rollover treats the distribution as having been held in the IRA all along. If the distribution was 70k and the shares were worth 100k when rolled back, client would show 70k (1099R amount) on line 4a and 0 on 4b with “rollover” next to 4b. While the IRA custodian would show 100k on Form 5498 as a rollover contribution, the IRS is somewhat accustomed to this. Still, to avoid any potential inquiry, an explanatory statement could be added to the 1040 when filed. If there has been a loss instead, this would be reported the same way with no current tax affect or write off. The IRA balance would just be lower than it would have been without the loss. Good thing client did not sell the shares, or the funds could not have been returned to the IRA.