Employer Stock in a Conduit IRA

[Guest mam]

I have a participant who left her prior employer, rolled her qualified plan account(consisting solely of employer stock) in-kind into a conduit IRA. She would like to liquidate this employer stock, and roll the cash proceeds into our 401(k) Plan. Our document says nothing that would prohibit this. Is this permitted? If so, what tax consequences, if any, should she be made aware of? Thanks for any assistance.

[LCARUSI]

It's permitted and there are no tax consequences - favorable or adverse.

She already lost any favorable tax treatment on the unrealized appreciation on the company stock when she rolled the shares into the IRA.

[This message has been edited by LCARUSI (edited 06-26-2000).]

[Guest Rudy]

LCARUSI is correct. The stock can be sold within the IRA and the funds rolled without any tax consequence.

[This message has been edited by Rudy (edited 06-26-2000).]

[Kirk Maldonado]

LCARUSI:

Would you take the same position if the participant rolled the stock back into the same plan from which it was distributed (i.e., the participant is rehired by the same employer and recontributes the amount back to the same plan)?

[This message has been edited by Kirk Maldonado (edited 06-26-2000).]

[This message has been edited by Kirk Maldonado (edited 06-27-2000).]

[LCARUSI]

Kirk -

First of all, I doubt the plan would allow a rollover (into it) of anything but cash.

But, if it did allow a rollover of securities and the security is the employer security, I'm not sure what the tax treatment would be. I doubt you could use the original cost basis for the stock from prior to its first distribution from the plan. Maybe you establish a new cost basis, based on the MV of the stock at the time the shares are rolled back into the Plan.