Securities Distribution from an IRA

[bzorc]

Question: IRA holder wishes to receive as a distribution a particular security held in his/her IRA account. I know that the amount of the distribution is calculated using the Fair Market Value of the security on the date of distribution. However, the question has arisen as to what the holding period (for capital gains treatment on future sale of the security) of the security is when it becomes a "personal" investment -vs- an IRA investment. I am under the belief that the holding period begins when the security is transferred; therefore, if you take the security out today and sell it tomorrow, the result is a short-term capital gain/loss at the personal level, even if the security had been held for 5 years in the IRA account.

Am I correct? Any replies would be appreciated.

[Appleby]

You are right. It will be treated in the same manner as if you purchased the security today. The period during which it was held in the IRA is disregarded.