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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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A stock was purchased for $5 in an IRA. Five years later it

Customer Question

A stock was purchased for $5 in an IRA. Five years later it was transferred to a brokerage account outside the IRA at a price of $10 and tax was paid on the $10 withdrawal from the IRA. Five years later the stock was sold for $20. What was the date of purchase and what was the basis of the stock?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.
Hi and welcome to our site! You are correct - when an IRA owner takes a distribution in stock, that distribution is taxable event and the value of the stock on the date of the distribution is subject to ordinary income tax. The new basis for figuring gain or loss on any further disposition is now the value of the stock on the date of the distribution.In your situation that is $10. The holding period for long or short term capital gain begins on the day after the IRA distribution, not on the day the stock was originally purchased within the IRA.So the date of the distribution is treated as the "purchase date" for reporting purposes.
Expert:  Lev replied 1 year ago.
As for later transactions...
The new basis for figuring gain or loss on any further disposition is now the value of the stock on the date of the distribution.
In your situation that is $10.
The holding period for long or short term capital gain begins on the day after the IRA distribution, not on the day the stock was originally purchased within the IRA.
So the date of the distribution is treated as the "purchase date" for reporting purposes.
Let me know if you need any help with reporting.

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