Pioneer Investment

[bekzm]

Client has Pioneer Investment 1099-B showing $6500 box 2 no cost. Description is Redemption to IRA Account so is he not taxed on the full amount for capital gain since it went into an IRA account. If he is taxed on it since he cashed it in - the basis will have to get all the paperwork from him since Pioneer did not furnish it. It seems to me that SINCE it went into an IRA - cost would be the same as the sales price. And the remainder that does not show the sale NOT going into the IRA - will have to get the basis for it.
Any thoughts or how to tax it - with cost basis or not???

[Burke]

Pioneer may not have furnished the basis, but if he bought it from them, they have it. If it transferred from somewhere else in a prior year, they can also tell the client that. Then he would have to get the basis from the originating custodian, assuming he did not keep any records. If he doesn't want to go to the trouble or it is unavailable, treat the entire distribution as taxable, no basis. Just because it all went into an IRA, you cannot use that as a basis. The IRA contribution goes on the front of 1040 subject to the rules, phase-outs, etc. etc. The Sche D gain and the IRA contribution may cancel each other out, but you cannot put it as basis on the Sche D to accomplish that.

[bekzm]

Thanks but

They cannot take the IRA as a deduction guess can be reported as the non reported contribution but guess I was thinking that the cost would be the $6500 due to being an IRA rolled into. Then when they start drawing it out they would be taxed on it. But keep track of the non deductible would be for them to keep track of. So tax it all since we don't have the cost basis and have a non deductible amount to not be tax when they start receiving distribution. Dang - be taxed twice maybe - confused I guess.

[FEDUKE404]

My 2¢ - two events

I have never seen a Form 1099-B issued for any kind of distributions from an IRA account. Funds going in are covered with Form 5498 and funds coming out are covered with Form 1099-R.

It sounds to me as if your client cashed in $6,500 worth of something and thus generated an independent tax event on that sale. That first leaves the plain vanilla tax work -- what was his cost basis and what did he sell it for....break out a Schedule D as if the IRA funding never occurred.

There is no cost basis transfer, or holding period/capital gains considerations, or anything else for funds within an IRA. Money goes in, money comes out.

It sounds as if the guy may have just wanted to "generate" $6,500 of funds for his IRA, but that does not make the Form 1099-B and related sale(s) go away.

BTW: Did you certify this guy IS eligible to even put any funds into a (traditional) IRA? Many clients get quite surprised when they find out "the rules" for making IRA contributions. . . and to resolve those mistakes you go from a small mess to a major disaster, depending on the time frame involved.

FE

[Burke]

They cannot take the IRA as a deduction guess can be reported as the non reported contribution but guess I was thinking that the cost would be the $6500 due to being an IRA rolled into. Then when they start drawing it out they would be taxed on it. But keep track of the non deductible would be for them to keep track of. So tax it all since we don't have the cost basis and have a non deductible amount to not be tax when they start receiving distribution. Dang - be taxed twice maybe - confused I guess.

He is not being taxed twice. The 1099-B (as FEDuke says) is a totally unrelated event from the sale of stocks or mutual funds. He probably has a basis in that, but it is his job to find out and give you the documentation on it. When he finds out how much it is costing him, he may be more motivated to obtain that information. Since he is ineligible for a traditional, deductible IRA, then it stands -- assuming he has earnings to qualify the contribution -- as a non-deductible IRA and that is his basis. When he draws it out, he will not be taxed on that portion. Only the earnings.

[Kram BergGold]

2 Transactions

The sale of the fund and the deposit to an IRA have nothing to do with each other. You report the sale on Schedule D with soem or or no basis depending upon what you or the client can figure out. Then he has an IRA deposit of $6500 which is eithe rdeductible or non deductible depending upon retirement plan coverage and income.
The latter has no effectg on the former.