Class Action Settlement for Shares in Traditional IRA
I am filling out a claim form for a class action settlement against Luckin Coffee and I have some questions was hoping you could help with. I purchased 20 shares of LK (Luckin Coffee) in my IRA in March 2020 and sold in May 2020. Had a loss of $632.
The claim form allows you to have the settlement award paid to the IRA itself. Was wondering if I need return these funds to the IRA in which they were originally in? If so, are they considered a contribution for 2022? If I just receive the check payable to myself, is this considered taxable income for 2022?
I realize this amount will be quite small, but I just wanted to make sure I was aware of the implications which each choice.
Thanks so much for your help in advance.
Permalink Submitted by Alan - IRA critic on Sun, 2022-01-30 20:53
These proceeds are called “restorative payments” and the IRS has ruled that they can be transferred back into the account that incurred the losses as a non reportable direct transfer that is not treated as a contribution. If the IRA account in which the loss occurred is still open, the payment should be transferred to that account. The ease of depositing the payment check into a different account may depend on how the payee reads on the check. In many cases the account that incurred the loss has been closed, and the IRS does not have an issue with the check being deposited elsewhere if the check is made out in a form that the new custodian can accept.
Permalink Submitted by Jane Gies on Mon, 2022-01-31 05:44
I really appreciate your prompt response. This information is so helpful.