Worthless Stock in Terminating PS Plan

[DP]

I have a PS plan terminating on 8/15/05. All of the HCE's have individual self-directed accounts. Dr. X has an old stock in his account that is worth about $10. The issuing company was going to charge $100 to $150 to change the registration on the stock from PS to IRA, so Dr. X decided to take a taxable distribution on this stock. However, the stock is still registered to the plan.

Dr. X is now asking - what if this stock miraculously goes up in value over the next few years and a dividend check would be issued. The check would go to the name of the PS Plan which doesn't exist. Also the corporation adopting the plan no longer exists.

How should a situation like this be handled? Thanks.

[WDIK]

It seems to me that in either case (rollover to IRA or taxable distribution) that the issuing company would need to change the registration, although they may charge $100 to $150 to do so.

[Blinky the 3-eyed Fish]

I think you have circumstances that show the doctor took the stock as a personal taxable distribution and the t's weren't crossed due to the large fees. I don't see it as an issue.

[WDIK]

due to the large fees

I'm sure we can all sympathize with the doctor.

(By the way, this response was not intended to be basically bland nor candidly critical.)

[mbozek]

The dividends would be paid to the plan as the owner of record of the stock and would be mailed to the plan's address since the company has no record that the Dr has possession of the shares. I dont know how the Dr. could cash the check if it is payable to the plan unless the plan trustee endorses the check to him.

[DP]

Dr. X was one of the Trustees of the plan. So he could sign the check as Trustee and then endorse it over to himself?

Thanks.

[Belgarath]

WDIK - but it was amusing. Maybe we'll have to add a category:

Splendidly Sarcastic?

Brilliantly Bantering?

Inimically Ironic?

Dangerously Discerning?

[Kirk Maldonado]

I prefer the appellation "Decidedly Disingenuous."

(My motto is "I eschew obfuscation.")

[Bird]

He's just postponing the inevitable...he should suck it up and re-register now, or (probably) just sell the stupid thing and get rid of it.

[Blinky the 3-eyed Fish]

When something is worth $20,000 and the registration fee is $150 that is one thing. When the thing is worth $10, that is an entirely different story. There may be no inevitability here since the item will most likely become worthless. Even if the thing skyrockets to millions, that paper trail is clear that is was a distributed asset, so there will not be adverse tax consequences.

The day I spend $150 on a $10 investment is the day someone needs to shake me violently. Also the day I pay a $100 commission to sell a $10 asset should result in the same punishment.

[Bird]

Blinky, I understand. I was thinking that selling it wouldn't cost so much but I don't know...IF it comes up later, and IF he is paying a professional hourly, the hourly charges for dealing with it will come to more than the commission.

[WDIK]

If the change in registration is unnecessary, then there seems to be no reason to incur the charge. However, if you are of the opinion that the change is prudent, another way of looking at the registration fee is that it is part of the total cost to complete the rollover/distribution. It seems likely that the doctor's total benefit is substanial and that $150 would be a small percentage.

(Please don't shake me violently. I already have neck and back pain.)

[rcline46]

If the plan is terminated and the stock is NOT re-registered then there simply is not an owner in they eyes of the issuer, and the stock will eventually escheat to the state. Dr. X is NOT Trustee X once the plan terminates. He should have had the plan sell the stock before distribution. Since he did not the response is TOUGH LUCK buddy! You bought it, now suffer the consequences.

Seems if the plan ACATed the stock to a brokerage account in the Drs. name there would not have been a problem. OH, you say it was not already in a brokerage account? TOUGH LUCK buddy!

[Blinky the 3-eyed Fish]

I fail to see how the issuer is going to have any knowledge whatsoever of the status of the plan, nor how it could possibly escheat to the state. I also fail to see how ACATing the distribution to a brokerage account versus taking the stock certificate is any different in the eyes of the issuer. It still is now owned by someone other than the plan. What's the difference? They still would show the owner as the plan unless the $150 was paid.

[AndyH]

Blinky, often Doctors such as this one spend the equivalent of $150 for something worth $10 because then they get wicked cool deductions, get tax sheltering of the $150, plus who knows what these investments might be be worth down the road- dividends could be worth millions. Interest rates are expected to rise you know.

[Blinky the 3-eyed Fish]

Don't you have revenge to muster against that shark?