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Subject age 69 - withdraws a considerable sum from IRA. Use $200k in value of several securities (stocks). Within sixty (60) days decides that 1 of the withdrawals of stock - value $10k for 1000 ($10/share) shares at time of withdrawal will be rolled over or reversed to the original IRA.

Questions follow:

1) Is the transaction for 1000 shares @ $10/sh equal to $10000 reversed?
2) Is the rollover amount calculated at the value of the share price on the date of the reversal? Example: date of reversal 45 days from withdrawal, price of stock $8, 1000 shares equal to $8000?

The brokerage firm will report the full withdrawal to the IRS & then report the rollover amount on a different form to arrive at the net amount to be used for tax purposes. The brokerage firm reports the rollover amount on IRS form 5498.

I can only learn that the transaction can be reversed (rolledover). What is definition of transaction?

Let me start with a caveat: I'm not sure of the answer I'm about to give you, but I think it's right.

To me the pertinent regulation is 26 CFR 408-4. It provides the following:

(b) Rollover contribution--(1) To individual retirement arrangement.
Paragraph (a)(1) [which says that distributions are included in taxable income]of this section shall not apply to any amount paid or distributed from an individual retirement account or individual retirement annuity to the individual for whose benefit the account was established or who is the owner of the annuity if the entire amount [emphasis added] received (including the same amount of money and any other property) is paid into an individual retirement account, annuity (other than an endowment contract), or bond created for the benefit of such individual not later than the 60th day after the day on which he receives the payment or distribution.

I read this to mean that if you roll everything you withdrew back into your IRA within the 60 days, it's as if you never withdrew anything. Although the value has changed and the amount on the 5498 won't match the amount on the 1099-R, you have a tax-free rollover with zero tax due.

However, I also read it to mean that if you roll over only the stock that has declined in value, the rollover amount would be calculated as the value on the date you roll it over. You would have a taxable distribution for the value distributed, minus the rollover.

Like I say, don't take this answer to the bank.

Phil Marti
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