From: juanb@vnet.ibm.com Subject: Stock distribution in Roth IRA? Date: 01 Aug 2000 09:15:44 EDT I have a Roth IRA setup at E-Trade. Right now, I only have mutual funds in it, but want to invest in a company. That company is spinning off one of it's holdings as an IPO in a few months, and after that will distribute the remaining shares of the company to the shareholders. My question is how is that distribution handled in a Roth IRA account? Is that considered a contribution or is it just like a dividend/cap gain distribution? Thanks, Juan - ------------------------------------------------------------------------------- From: Paul Slonaker Subject: Tax Liability for Deceased Mother-In-Law Date: 02 Aug 2000 11:08:14 -0400 My mother-in-law died earlier this year, leaving my wife and her two sisters as beneficieries and co-executors. (My father-in-law had died in 1995.) She died in Florida, which was her primary residence (she spent about half of the year in New York). My questions have to do with her tax liability. For many years, starting well before my father-in-law's death in 1995, my in-laws did not even file a Federal tax return, having been advised by an accountant that their income was low enough. My MIL continued this practice after my FIL died. As far as I know, she did not file returns for either New York or Florida as well. But when I looked through her financial papers and found 1099 forms for 1999 and 1998, it seemed to me that her income was indeed high enough that she would have had to file - and would have owed taxes. To be precise, for 1999 she had interest and dividend income of about $10,400; after subtracting the standard deduction ($4300) and exemption ($2750), she would have owed about $500 at 15%. Her situation in 1998 was similar. My questions: 1. Is my analysis correct? This seems very straightforward, but I may be overlooking something. 2. What's the liability of the beneficiaries/executors? It seems to me that the estate is liable for any back taxes and penalties. If the estate doesn't pay them, are the beneficiaries/executors individually or jointly liable? 3. How far back are we liable? It seems to me that we could be liable for taxes owed by my MIL since my FIL's death, but (I hope) not before that. My BIL, who was the executor for my FIL's estate, claims that the lawyer who handled the estate did not file a Federal income tax return. (It's also possible that their/her tax situation changed sufficiently at his death that she owed taxes afterward but they would not have owed taxes before.) 4. Roughly speaking, how likely is it that this would ever come back to haunt us? My SIL's are all for ignoring this in hopes that we'll never be called on it. I think that that's irresponsible, but I think that they would only be convinced of this if they thought there could be major repercussions later. Thanks for your attention. -- Paul Slonaker - ------------------------------------------------------------------------------- From: Jeff Salisbury Subject: Re: Stock distribution in Roth IRA? Date: 02 Aug 2000 15:27:54 -0600 juanb@vnet.ibm.com wrote: > > I have a Roth IRA setup at E-Trade. Right now, I only have mutual > funds in it, but want to invest in a company. That company is > spinning off one of it's holdings as an IPO in a few months, and after > that will distribute the remaining shares of the company to the > shareholders. My question is how is that distribution handled in > a Roth IRA account? Is that considered a contribution or is it just > like a dividend/cap gain distribution? > > Thanks, > Juan > > - Hello Juan, Tax Free! Remember, you will never pay taxes again on any money in a Roth (assuming you abide by the distribution rules and assuming Congress doesn't change the rules). It doesn't matter how big it grows, it is all tax free as long as you abide by the rules... Jeff -