Repayment of 2020 IRA Stock Distribution In-Kind
If someone took out a 2020 IRA stock distribution in-kind under the CARES act (CRD), with the intention of repaying it in 3 years, how does the repayment work? Would you repay it with cash equal to the FMV of amount distributed or would you pay it back with the same number of stock shares in-kind? If the latter, what do you do about the difference in the FMV between the date of distribution and the date of repayment?
Permalink Submitted by Alan - IRA critic on Thu, 2020-07-30 16:30
A distribution from an IRA of non cash securities must be rolled back or repaid with the same securities that were distributed. The securities cannot be sold and cash repaid to the IRA. Because of the 3 year repayment deadline for a CRD, distributing in kind presents issues since the shares must be held until they are repaid, or if sold there cannot be repayment, and the sale must then be reported as a cap gain or loss. If the shares are rolled back, the repayment is reported based on their value upon distribution regardless of what they are actually worth when rolled back. This is not a taxable event and not reported on Form 8949 or Sch D. If the shares are sold, it is not clear whether new shares can be repurchased and returned as if they were the original shares.