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I just found out that my Taiwan Semiconductor (TSR) stock paid a 40% stock dividend, which was taxed at a 20% rate (with much discussion on the TSR board). This stock is held in my IRA. Does anyone understand how this is handled from a IRS standpoint? I can do the math to come up with the new share value but how do I (if possible) recover the foreign tax paid on an IRA holding?

I believe that there is nothing to do. IRAs are essentially "black boxes" for tax purposes. Whatever happens inside the IRA is irrelevant to the determination of income tax. When you take a distribution, the amount of the distribution will be ordinary taxable income regardless of how the value was "created." Issues such as cost basis, dividends, foreign taxes have no bearing on IRAs and can be ignored for tax purposes. They are only "important" if you track investment performance for your own personal objectives.

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