Holding Period

[Snaggletooth]

Schmucko had 100 share of DuPonts in his IRA with zero basis as of March 1, 2008. These shares were originally purchased in 2001 from a cash balance which was in his IRA.

He transferred these 100 shares to an ordinary brokerage account on March 1, 2008, at a value of $48/share. Since the brokerage account was with the same custodian, there was no commission or fee involved. He fully anticipates receiving a 1099-R for $4800 for 2008.

On November 1, 2008, the value of DuPont had shrunk to $29. He decides to sell these shares on that date and take a tax loss of $1900.

Is this a long-term or short-term capital loss??

[erchess]

Bump

Knowing of nothing that would require anything different I would treat them as a long term sale and add the $4800 to my basis. Let them catch me if they can!!!

[taxmom34]

correct me if i'm wrong, but i thought that losses or gains within an IRA were not reported on tax return as a gain or loss.
And how come the original cash invested from the IRA is not considered here at all.

[BOB W]

correct me if i'm wrong, but i thought that losses or gains within an IRA were not reported on tax return as a gain or loss.
And how come the original cash invested from the IRA is not considered here at all.

You need to reread the question. A distribution of the stock was made and then later the stock was sold.

I believe it is a LTCG.

[taxmom34]

but, if client is getting 1099R isnt that a distribution from the IRA.?

[BOB W]

but, if client is getting 1099R isnt that a distribution from the IRA.?

Yes. and he is getting a 1099R for the $4800. Months after the distribution he sold the stocks for $2,900. This gets him a loss>> He wants to know if it is ST or LT loss.

[newbie]

If I'm understanding the transaction he will get a 1099R for the $4,800 and a 1099B for the $2,900. I would think longterm, but have no authority to back that up.

[Snaggletooth]

On Track

Newbie and BobW are on track. $4800 was a taxable distribution at the point it was transferred out of the IRA. Ultimate sale 8 months later was $2900, meaning there is a $1900 loss. Is this a long-term or short-term loss?

The original purchase of cash within the IRA is causing confusion, as it may be difficult to understand how cash can have no basis. It doesn't if it has always been in an IRA.

[jimmcg]

Agree with Bob W,. holding period starts with placement in the taxable account. This I believe is covered in the apllicable Regs but don't have time to look at the moment, too many good football games on,

[les grans]

It's clearly a short-term capital loss. The basis of the stock in the taxpayer's hands is determined on, and his holding period starts on, the date the shares were distributed from the IRA to the taxpayer. Intuitively obvious to the most casual but slightly enlightened observer.

[Actually, his holding period starts on the day *after* the distribution, but that's the kind of hyper-technical nuance that would tempt me to have a drink. Oh, thank you, I think I will. Make mine a Dewar's.]