Tangible Assets

[Guest m.n.ouellette]

Hi. I have a client who is closing his PS 401(k) plan. He has bars of gold (!!!!) and I'm wondering how to 1099-R him. Is it considered a "cash" distribution, to be taxed? He can't exactly roll it over to an IRA.

There may be an obvious answer, but this happens so rarely (no pun meant), that I am doing a double take!

Thanks for any help.

[QDROphile]

If the distribution is not rolled over directly, 20% withholding is required and assets must be liquidated to the extent necessary to cover withholding subject to some exceptions not applicable to gold. An interesting question is whether or not the particpant can use outside funds to cover the withholding. If the participant did not elect a direct rollover of a cash distribution, the participant could use outside funds in that amount of the 20% withholding to achieve a 100% indirect rollover. So if the same principal applies ... ?

[WDIK]

Also, the plan must allow for in-kind distributions.

[masteff]

He can't exactly roll it over to an IRA.

Why not? While normal contributions to IRAs have to be in cash, you can rollover property distributed from a qualified plan. And since gold bullion is one of the exceptions for investments in collectibles in IRAs then the IRA could hold it once it was there. See page 28 of IRS pub 590 http://www.irs.gov/pub/irs-pdf/p590.pdf (Also page 27 of pub 575 http://www.irs.gov/pub/irs-pdf/p575.pdf ) Is there some other restriction to rollovers of property that I'm missing?

(I'm happy to be corrected if I'm offbase as I'm more of a qualified plan person than an IRA person.)