substitute one IRA investment for another Options

[K2retire]

There is no transfer between the employee and his IRA because the company is ALLOWING the employee's IRA the right to purchase its stock directly in the same manner permitted under Ancira, where the IRA custodian issued a check to the company to purchase stock to be issued in the name of the employee's IRA. Under these facts there is no transfer between the employee and the IRA.

Do you disagree with Ancria?

Are you saying that the company is issuing the warrants directly to the IRA, not the employee? Wouldn't that imply that the company was making a contribution directly to the IRA?

[Guest_named_mjb_*]

There is no transfer between the employee and his IRA because the company is ALLOWING the employee's IRA the right to purchase its stock directly in the same manner permitted under Ancira, where the IRA custodian issued a check to the company to purchase stock to be issued in the name of the employee's IRA. Under these facts there is no transfer between the employee and the IRA.

Do you disagree with Ancria?

Are you saying that the company is issuing the warrants directly to the IRA, not the employee? Wouldn't that imply that the company was making a contribution directly to the IRA?

How is there a contribution by the employer to the IRA if the issuer allows the IRA to purchase the stock as allowed in Ancira? The employer can allow the warrants to be exercised by more than one entity. Why cant the IRA purchase the stock directly from the issuer if the stock purchase plan allows warrants to be exercised by the employee or a trust which is controlled by the employee? Again where is the PT violation?

[K2retire]

There is no transfer between the employee and his IRA because the company is ALLOWING the employee's IRA the right to purchase its stock directly in the same manner permitted under Ancira, where the IRA custodian issued a check to the company to purchase stock to be issued in the name of the employee's IRA. Under these facts there is no transfer between the employee and the IRA.

Do you disagree with Ancria?

Are you saying that the company is issuing the warrants directly to the IRA, not the employee? Wouldn't that imply that the company was making a contribution directly to the IRA?

How is there a contribution by the employer to the IRA if the issuer allows the IRA to purchase the stock as allowed in Ancira? The employer can allow the warrants to be exercised by more than one entity. Why cant the IRA purchase the stock directly from the issuer if the stock purchase plan allows warrants to be exercised by the employee or a trust which is controlled
by the employee? Again where is the PT violation?

Everything that I know about Ancira is what you have typed above. I am neither agreeing nor disagreeing, but rather trying to understand. I've simply never heard of a warrant being exercisable by anyone other than the person to whom it was granted and I'm struggling to understand how or why the company would grant a warrant to an IRA without it being considered to be a contribution to the IRA.

[jevd]

Maybe I can explain my point in a different way.

If the IRA did not receive the warrants by either an arms length purchase or a rollover from another plan then how is there not value transferred when the warrants are exercised by the IRA at a price below current market value. The IRA has gained the benefit of the discount afforded by the warrants. The IRA is a separate entity from the IRA owner. As K2 stated above how does the IRA get the benefit of the use of the warrants without value being transferred to the IRA.

GO back and Read Ancira HERE; ANCIRA

There is no mention of Warrants, The IRA owner instructed that a check be drawn payable directly to the company under a subscription agreement, not a warrant (discount). The funds were paid directly to the company and transmitted by the account holder to the company and the stock issued in the name of the IRA. The courts ruled that the account owner was the conduit on behalf of the IRA and no distribution took place. I agree with that. There was no value transferred as there was no discount involved.

This post has been edited by jevd: Nov 11 2008, 09:36 AM

[Guest_named_mjb_*]

Maybe I can explain my point in a different way.

If the IRA did not receive the warrants by either an arms length purchase or a rollover from another plan then how is there not value transferred when the warrants are exercised by the IRA at a price below current market value. The IRA has gained the benefit of the discount afforded by the warrants. The IRA is a separate entity from the IRA owner. As K2 stated above how does the IRA get the benefit of the use of the warrants without value being transferred to the IRA.

GO back and Read Ancira HERE; ANCIRA

There is no mention of Warrants, The IRA owner instructed that a check be drawn payable directly to the company under a subscription agreement, not a warrant (discount). The funds were paid directly to the company and transmitted by the account holder to the company and the stock issued in the name of the IRA. The courts ruled that the account owner was the conduit on behalf of the IRA and no distribution took place. I agree with that. There was no value transferred as there was no discount involved.

Ancira states the principle that the employee can act as a conduit to transmit IRA funds to facilate the IRA's purchase the of stock from an issuer. There is no PT if the IRA, as permitted in Ancira purchases the stock with its own funds directly from the company under the terms of the stock purchase agreement since there is no value transferred from the employee to the IRA to facilitate the purchase.

Why cant the stock be offered by the company to the IRA at the same discount offerred to other participants? Please describe the PT, including the name of the disqualified person under IRC 4975(e)(2) in this transaction.

This is why the the tax adviosr must read the stock purchase agreement to determine if the IRA can make a direct purchase of stock from the company. If the employee has to transfer rights to the IRA in order to purchase the stock then there is a PT.

[GBurns]

The employee acting as a conduit does not seem on point with the OP.

In the OP, the taxpayer is personally going to "remove" and "substitute" the asset. There is no mention or suggestion of acting as a conduit or subrogating rights or anything else.

Then whether acting directly or as a conduit, I think the issue of constructive receipt presents problems.

[jevd]

Maybe I can explain my point in a different way.

If the IRA did not receive the warrants by either an arms length purchase or a rollover from another plan then how is there not value transferred when the warrants are exercised by the IRA at a price below current market value. The IRA has gained the benefit of the discount afforded by the warrants. The IRA is a separate entity from the IRA owner. As K2 stated above how does the IRA get the benefit of the use of the warrants without value being transferred to the IRA.

GO back and Read Ancira HERE; ANCIRA

There is no mention of Warrants, The IRA owner instructed that a check be drawn payable directly to the company under a subscription agreement, not a warrant (discount). The funds were paid directly to the company and transmitted by the account holder to the company and the stock issued in the name of the IRA. The courts ruled that the account owner was the conduit on behalf of the IRA and no distribution took place. I agree with that. There was no value transferred as there was no discount involved.

Ancira states the principle that the employee can act as a conduit to transmit IRA funds to facilate the IRA's purchase the of stock from an issuer. There is no PT if the IRA, as permitted in Ancira purchases the stock with its own funds directly from the company under the terms of the stock purchase agreement since there is no value transferred from the employee to the IRA to facilitate the purchase.

Why cant the stock be offered by the company to the IRA at the same discount offerred to other participants? Please describe the PT, including the name of the disqualified person under IRC 4975(e)(2) in this transaction.

This is why the the tax adviosr must read the stock purchase agreement to determine if the IRA can make a direct purchase of stock from the company. If the employee has to transfer rights to the IRA in order to purchase the stock then there is a PT.

I think we agree.

[jevd]

The employee acting as a conduit does not seem on point with the OP.

In the OP, the taxpayer is personally going to "remove" and "substitute" the asset. There is no mention or suggestion of acting as a conduit or subrogating rights or anything else.

Then whether acting directly or as a conduit, I think the issue of constructive receipt presents problems.

My point was not with the OP but with the discussion of an IRA excercising warrants owned by the IRA account owner as an individual and whether the transfer of rights to the IRA account by the individual was a PT or at least an overcontribution in kind of the warrants to the IRA account.