Returning an In-Kind Roth IRA Distribution
Hello –
I took shares of stock out as a distribution (an In-Kind Distribution) from my Roth and I understand the distribution is valued at the fair market value of the stock at the time of distribution. However, I am still in the 60 day roll over window and I’d like to put the securities back into a Roth. Since my distribution, the value of the securities have gone down a material amount. When I roll the securities back into a Roth, is it enough to put the lower valued securities back in (the exact same shares), or do I have to roll over the same fair market value of the distribution – in other words make up the difference with other money so I have no taxable distribution? I’m hoping I can just do the securities to complete the rollover. Thanks for your help!
Permalink Submitted by Alan - IRA critic on Fri, 2022-01-28 15:08
You can and you must transfer the same securities back within 60 days to be able to report a complete rollover of the distribution. You would report the rollover on your return in the same manner as if the value of the shares had not changed, but because the 5498 issued by the Roth custodian will show the reduced value, you should add an explanatory statement to your return indicating that you took an in kind distribution and rolled the same shares back to the Roth. You could not add other amounts in any form to make up losses or you would create an excess Roth contribution and confuse the custodian if you had already made your eligible Roth contribution or TIRA contribution. Obviously, the original in kind distribution must have been a single distribution or the one rollover limitation would also come into play.
Permalink Submitted by Eric MacCollum on Fri, 2022-01-28 17:03
Thank you so much for this reply – greatly appreciate the help and detailed answer!One follow up question – is there any regulatory reference for this or a source that I can find that? I have looked everywhere. I want to be able to include that with the explanation on my return and stay one step ahead of the IRS.