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New Member
posted Jan 26, 2021 7:26:34 AM

I early withdrew IRA to invest in my employer Class B private shares (I’m a shareholder) and receive a K-1 (but $0 profit)...does this qualify as ‘converting’ or rollover

I had a rollover IRA from years ago that I withdrew money from, paid 10% taxes at the time of withdrawal and invested this money in my company shares.  We are employee owned, can I reduce tax liability as this money was reinvested in something?

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4 Replies
Expert Alumni
Jan 26, 2021 7:46:23 AM

No, taking an IRA distribution to invest in shares of the company you are working in does not entitle you to any tax deductions or credits at the time of investment.

New Member
Jan 26, 2021 9:15:21 AM

Is there a way to record my investment to my shares with my employer as something that will help my tax liabiiity?

Expert Alumni
Jan 26, 2021 9:32:57 AM

Unfortunately, there isn't a special tax break available for reinvesting IRA distributions in a non-retirement investment such as public or private securities.

 

Once you remove funds from a qualified retirement account, they lose any special tax treatment (other than if you made a qualifying rollover).

 

When you sell those shares, however, the amount you paid for them will count as their cost basis and will reduce the taxable gain on the sale.

New Member
Jan 26, 2021 10:18:03 AM

My financial institution did not have any cost basis information for the monies I withdrew.  If I can figure out what that was, could it reduce my tax liability on this withdrawal?