asset in plan has market value of $0

[Guest D. Leeke]

A plan which was an employer-directed profit sharing plan holds an asset that at one time had a market value of $0. The plan added 401(k) and became participant-directed, and the asset was dropped from the books because it had no value. However, several years later, this asset has now increased to $75,000. How do we allocate it to participants? What should be done when a plan's asset becomes worthless? How long do you keep a worthless asset on the books?

[Guest b2kates]

1. How long keep on books?

As long as ownership is titled to the Trust

2. How allocate?

Normal earnings and loss allocation as defined by plan.

3. What to do with worthless asset?

Trustee decision, fiduciary obligation to handle. May make sense after a time period to sell asset to dispose of it. Might require PT exemption.

Good luck