IRA Rollover to CDs

[ruthc]

I have a TP that is rolling over her Roth and IRAs from mutual funds to another bank into CDs. I am thinking into the future on how to handle basis when the money is taken out of the CDs. I know the basis and gain of each stock because right now they are being held in a cash reserve acct until transferred to the bank. Many CDs will be set up.
What will be the basis in each CD? Will I have to take the market value when it went into the reserve account (the value shouldn't change while being held in reserve)? If so, that amount includes the gain/loss from many years when it was first set up as IRAs. So when the CDs are closed and cashed in, what would be the basis/gain? I may be confusing myself the more I think about it.
Can someone guide me in the right direction? Thanks for your help!

[Gary2]

For a retirement account, the basis of the individual stocks, bonds, etc. is irrelevant. The only basis for a traditional IRA is derived from non-deductible contributions, and tracked on Form 8606. For a Roth IRA, I've never seen the term "basis" used, but it's necessary to track the contributions (not the basis of individual investments) in the event of potentially taxable withdrawals.

[Roberts]

Ruth, are you currently reporting the gains / losses of stocks sold in those IRAs?

[JoshinNC]

Provided the new CDs are titleD to your clients IRA

Then the only reporting you have is a rollover from one IRA to another. No basis tracking, etc. now, if your client's bank has tricked them into distributing their IRA to then "invest" it in a CD then you should tell your client to tell the bank to get lost and work with a reputable financial advisor.

BTW, I will bet you the money is not going in a CD, but in a "CD like" annuity contract that the bank "advisor" has recommended. Let me know if you find out that I'm right about that.

[FEDUKE404]

To reiterate...

...what Gary2 stated.

There is absolutely NO basis tracking issue, to include stock/mutual fund purchase costs or eventual sale gains/losses, within an IRA. (OK, a closed out account may have an asterisk affixed re original basis re funds placed into the account.)

The oft-used analogy of the IRA Black Box applies: Money "in" = deductible and money "out" = taxable. All else that occurred within the account is irrelevant for any tax issues.

**IF** the client ever placed allowable but non-deductible funds into an IRA account, then there is a separate adjustment of the amount taxable (via Form 8606) for any funds later withdrawn.

As for the OP, the client needs to be very careful (s)he does not create taxable events by "rolling over" the funds. If the client has an existing IRA "stock" account, and withdraws those funds (a Form 1099-R will be generated), then ALL of those funds need to go to the new bank to preclude a taxable event. Why not an institution-to-institution transfer, or even more simple just "sell" the stocks and buy CDs with the current IRA account firm?? FWIW: In today's environment, buying extremely low-interest CDs, especially with a distant maturity date, may not be financially wise in the first place!

FE