dmertz
Level 15

Retirement tax questions

@Darkstalker , the treatment must be the same as for any indirect rollover.  Was it cash that was distributed from the 401(k) or was there an in-kind distribution of shares from the 401(k)?  If it was cash, the rollover must be complete with the same amount of cash and any investment activity in the brokerage account is irrelevant to the rollover.  If it was a distribution in-kind, the fact that capital gains remained in the brokerage account implies that the shares were sold in the brokerage account and the indirect rollover should have been completed by a rollover of an amount of cash equal to the cash proceeds from the sale of the  original shares regardless of the change in value of the shares between the time of the distribution from the 401(k) and the sale of those shares in the brokerage account.  If the cash was used for trading in the brokerage account, that results of that trading remain associated with the brokerage account and that trading has no effect on the amount required to be rolled over to the IRA to complete the indirect rollover.

 

If the rollover is a late rollover, the use of the cash from the 401(k) or the cash proceeds from the sale of shares distributed in-kind from the 401(k) for trading within the brokerage account might be considered an intervening use of the funds that could disqualify a late rollover, but generally the IRS leaves it up to the IRA custodian receiving the late rollover to make that determination as to whether to accept self-certification that the rollover would qualify for a waiver of the 60-day rollover deadline.