That's what I was afraid of. The transaction that was performed was impermissible. Regular IRA contributions are only permitted to be made in cash.
I suspect that this will have to be corrected by making an in-kind return of excess contribution to the Roth IRA, but I've never before heard of someone in this situation. This distribution would be considered to be a distribution of Roth IRA contribution basis, so not taxable, but would require substantial explanation to the IRS. The explanation is complicated by the fact that the return of contribution will be priced at the current value of the shares rather than the share value on the date of the contribution to the Roth IRA.
The only other way that this could possibly be addresses is by you reporting this as a sale outside of the Roth IRA on the date the shares were deposited into the Roth IRA, a deposit of the cash proceeds, and then a repurchase of the shares in the Roth IRA. However, I know of no IRS guidance that would permit such a resolution. If you are permitted to do this, this would be subject to wash-sale rules if the basis in the shares was more than the share value on the date that the shares were deposited into the Roth IRA.
By not issuing any Form 1099-B, the brokerage apparently is treating this as if it was an indirect rollover of an in-kind distribution from another retirement account.
It's also not clear what the Roth IRA custodian considers this deposit to be. As an in-kind deposit, they would either have to treat it as a nonreportable transfer from another Roth IRA (but only if they somehow had some reason to believe that the shares actually came directly from another Roth IRA), a Roth conversion (but only if they somehow had some reason to believe that the shares actually came a traditional IRA), or a rollover from a qualified retirement account like a 401(k). Since it was an in-kind deposit, it would be impermissible of them to report it in box 1 of Form 5498 as a regular contribution. The Roth IRA custodian should not have even accepted an in-kind deposit unless they knew that it came from an in-kind distribution from some other retirement account.
