Schedule H Line 2a(C) or 2a(2) for in-kind rollover?

[Guest M. Martin]

I have a question regarding how a regular participant rollover received in-kind (mutual fund or common stock) should be reflected on the Schedule H. Because of how it was coded it appears on the annual statement under the Noncash Contribution category.

Would it be appropriate to include this amount with rollovers received in cash on Line 2a(1)© Others (including rollovers) or on Line 2a(2) Noncash contributions with a footnote indicating this was an in-kind rollover?

Recently the IRS concluded a project where they were reviewing plans that reported Noncash contributions for potential prohibited transactions (background excerpt below and the link):

http://www.irs.gov/Retirement-Plans/Employee-Plans-Compliance-Unit-(EPCU)---Projects-with-Summary-Reports---Non-Cash-Contributions-Project

Background

The transfer of property to reduce a sponsor’s obligation to the plan constitutes a transfer to reduce an obligation of the employer. In the absence of an applicable exemption, such a contribution is prohibited under Sec 406(a)(1)(A) of The Employee Retirement and Income Security Act of 1974 (ERISA) and Internal Revenue Code section 4975©(1)(A). A prohibited transaction exists even if the value of the contribution exceeds the sponsor’s funding obligation for the plan year in which the contribution is made and is not used to reduce the plan’s accumulated funding deficiency for that plan year, because the contribution results in a credit against funding obligations that might arise in the future.

The value of an item other than cash contributed to a plan is reported on Form 5500 Schedule H or I. Non-cash contributions to a plan must be valued annually. Non-cash contributions for which the value is neither readily determinable on an established market nor set by an independent third party appraiser must be reported on Schedule H or I as appropriate.

Thank you

[BG5150]

Rollover. That's what it was.

First line of your excerpt is also a clue:

The transfer of property to reduce a sponsor’s obligation to the plan constitutes a transfer to reduce an obligation of the employer.

(emphasis mine)

This wasn't an obligation of the employer.

[masteff]

with a footnote

If you're genuinely worried about throwing up red flags, it hurts nothing to add a valid note explaining something unusual on a return. Admitted, it's been 15 years, but I was taught that the IRS computer kicks out items for human review, which is where the note comes into play. Anticipate the right question and you can (often but no guarantee) prevent further review or audit.

[Guest M. Martin]

Thank you. I also received two other responses that agreed it should be included with the other rollovers.