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Old 03-30-2016, 07:02 AM
 
2 posts, read 595 times
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Hello, I own stock in a private biotech company that has yet to turn a profit. Purchased the stock in 2003 (one time investment) using cash on-hand and it's gone through a number of splits. Total investment in the $65-70K range. My current cost basis is about 25 cents / share, ~250K shares total. Trying to figure out the best approach to moving the stock into a retirement account asap. I am 55 and looking to protect as much of the future dividend or profit from sale from taxes as possible.

Is a self-directed Roth IRA my best option?
How do I figure the maximum amount of this investment, calculated in $$ or shares, that I can transfer into the retirement account each year? I am currently assuming it's $4,000 per year (I'm married) or the equivalent of ~ 16,000 shares assuming the .25 cost basis (post all splits).

Thank you!
Dave
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Old 03-30-2016, 08:11 AM
 
Location: Idaho
1,456 posts, read 1,158,755 times
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If the stocks are not in a 401K or IRA, you can not convert the money to a Roth IRA.

If the stocks are in a 401K or IRA, you can convert to Roth IRA but you have to pay taxes on the converted amount (it is treated as income).

Assuming that the stocks are currently your non-retirement asset, you can sell the stocks each year and use the proceeds (after taxes) to contribute to a Roth IRA (up to the allowable limit) or even a deductible IRA (if your income exceeds the limit) then convert the IRA to Roth (back door contribution).

About IRA/Roth IRA Contribution Limits, For 2015 and 2016, your total contributions to all of your traditional and Roth IRAs cannot be more than $5,500 ($6,500 if you're age 50 or older). The same applies to your spouse whether she works or not.
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Old 03-30-2016, 09:16 AM
 
2 posts, read 595 times
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Thank you! Would a company's traditional IRA program like Fidelity allow me to contribute a private companies stock to the IRA account I have with them or would I need to set up a self-directed IRA?

Dave
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Old 03-30-2016, 11:17 AM
 
Location: Florida
4,376 posts, read 3,714,793 times
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The value to use for the stock would be the current market value.

I would write to Fidelity etc and ask the question. You have two problems. Finding a trustee that will hold the investment is the first.

The second is moving a non retirement assets into a retirement account. The only way I know how to do this would be to sell a little bit of the investment each year and take that cash and contribute that to the IRA or ROTH IRA in accordance with the annual contribution rules. You will need to pay the capital gains tax on your sales.

If you move to a regular IRA all disbursements will be taxed at ordinary income tax rates. Not capital gains rates.

If you go to a ROTH no future tax.

What advantage are you looking for by making the change? The only advantage I can see would be going to a ROTH because you expect extremely large gains in the future. Of course it could take 10 to 20 years to make the conversion and you will need earned income each year.
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Old 03-30-2016, 01:39 PM
 
Location: Idaho
1,456 posts, read 1,158,755 times
Reputation: 5523
Quote:
Originally Posted by DWSIndy View Post
Thank you! Would a company's traditional IRA program like Fidelity allow me to contribute a private companies stock to the IRA account I have with them or would I need to set up a self-directed IRA?

Dave
Here is the answer to your question:

I have some stocks in a taxable account. Can I use them to fund my Roth IRA instead of using cash? | Investopedia

Regular IRA contributions must be made in cash. Contributions of securities are not allowed. Internal Revenue Code Section 219(e)(1) and IRS Publication 590 provide detailed information about IRA contribution rules.

Exceptions apply to rollover contributions if the same security was distributed.
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