Self-Directed Roth IRA Valuation Options

[walter3ca]

I have a friend who has a Self-Directed Roth IRA. He needs a valuation from a CPA or an attorney by the 15th. Lucky me, I'm the attorney. But I have no idea what this valuation is supposed to look like. The IRS is not helpful. Is there some sort of boiler-plate that I can use which will satisfy this valuation requirement? Thanks.

[John G]

Lots of folks have self directed Roths that involve stocks, bonds and mutual funds. The custodian for these types of funds produces and Dec or Year-end statement that shows the valuation as of the end of the year.

Perhaps you are refering to a Roth that has outside investments like hedge funds, thinly or non-traded stocks, or some type of real estate investment. Hedge funds will give you a year end statement of value.

Thinly or non-trading stocks present a much tougher problem - you might need an appraisal or perhaps the company has some internal guidance as to their assumptions about the value of the stock. (For example, you leave an employee owned company, and while you still have their stock in your portfolio...ussually you must liquidate or cash in the shares before you leave.

Real estate holdings...also very rare in a Roth...may require a third party appraisal.

I have never quite figured out why the IRS requires a year end accounting. It seems to be purely a "Census" type figure since I don't see any relationship to taxes. The Federal government does mandate some minimum level of portfolio performance, so there is no problem if the assets go up and then down. Perhaps some of our accountants can comment on why this is part of the tax code.

I have three clarifying questions:

(1) who is requiring this data by the 15th?
(2) what type or class of assets are in the account.
(3) do you want year end valuation or the valuation as of Jan 15th (is this related to a divorce?)