transfer to non retirement account

[Guest dcf]

My online broker said I could transfer my shares to a non-retirement account. Is this true? If so, can I deduct the loss if I sell the shares from the non - ret acct. Thanks.

[John G]

I assume you are talking about either an IRA or Roth IRA account, but you did not say specifically. If it is one of the IRA accounts, you would not be "transfering" your shares, you would be taking a distribution. If you are not older than 59 1/2, you would incur a 10% penalty and would owe taxes if the amount transfer was greater than your basis. Yes, there is a way to write off tax losses in IRAs but the method is complicated, it requires you to close most or all your IRAs, you can't cherry pick specific investments that loss money, the write off has a percent of income limitation, etc. Probably 95% of the folks who think about this will not be able to make it work.

See the various comments and articles at this message board link:

http://www.benefitslink.com/mbmirror/12458.html

[QDROphile]

And get yourself another borker. This one is completely self interested or incompetent.

[John G]

When asking a complicated IRA question of any custodian, skip the sales clerks and order takers and ask to be connected to the backroom IRA department. They are much more likely to be trained on the details of IRA issues. But don't even trust the answer you get from them. Check with your accountant or tax preparer as well. It is easier to correct a problem before it is created and there are lots of peculiar date and procedure issues with IRAs. Less heartburn, less time wasted.

QDRO, the person posting the question may just not understood the answer they got. Customers often don't understand that transfer, distribution and cash out mean different things. If the tax payer fails to ask a clear question or leaves out important information, the custodian can easily make a mistake in the information they provide. You sure see those problems on this message board too.

I believe that the error rate among custodians is pretty even. There is a much greater risk of asking the wrong person within the firm.

[QDROphile]

I tend to be uncharitable to persons who purport to be professionals. Peple who don't know should say so. If the broker (was "borker" a Freudian slip or bad typing?) simply answered a poorly asked question, it is still shame on the broker. The nature of the question, even if poorly asked, deserved a careful and complete examination and answer because the issue can be confusing to a civilian and the consequences can be significant and irreversible. Perhaps I am unfairly harsh because the client's impression from the answer would lead to transactions that are likely to generate more revenue for the broker.

[John G]

Totally agree with your comment about disclosure of what you don't know and the pro should have asked clarifying questions before giving advice. Contractors, consultants or business persons that honestly admits the limits of their knowledge gets plaudits from me. When I chose my accountant, he was very clear about the limitations of what he knew about IRAs and then Roths. We both have learned a lot in a decade.