Cost basis for Stock transferred from IRA to personal account....

dcs1037

I purchased shares for $32000 in my IRA account about 3 years ago. They are worth $26,000. If I were to transfer these shares to my personal account, I will have to pay income tax on $26000. Can I sell the shares from my personal account, and take a loss of $6000 against my long term capital gains? What would be the basis and holding period of the shares that I have transferred? Can you please point me to any IRS publication on this topic?

Thanks.

veegee

@dcs1037 , I'm not a tax expert, and please do not consider this financial advice. But the way I would have done this would be:

1. Sell the shares in the IRA account (there is a loss here, but that should have no tax consequences IMO)
2. Transfer how much money you want from IRA to the personal account (whether it came from the sales of these shares or prior existing cash balance).
3. Note: Doing 2 above will results in a taxable distribution from IRA - you should get a 1099 (or some other) tax form at the end of the year. You will have to pay tax on the amount. While doing this, you can also ask your IRA holding institution to withhold taxes. I would normally set this to my current tax bracket but one can choose any percentage).
4. Buy back the shares, if you wish, in your personal account.

There are probably other ways to do this that have better tax effects, but I like to keep things simple and straightforward. Irrespective of how you do it, the IRS may treat it as equivalent to the above anyway.

Does your broker allow such a transfer of shares between IRA and personal?