The IRS has released a draft of Form 1099-R and the Instructions for Forms 1099-R and 5498 for distributions and contributions made in 2014 and reported in 2015. Both the 1099-R and 5498 have changes for 2014 to enable identification of non-cash distributions and Fair Market Values that must be determined where FMV is not readily available.
On Form 1099-R for 2014, the new distribution code K will be used to indicate that assets other than cash were distributed. Such assets may include stocks; short or long-term obligations; ownership interests in limited liability companies (LLCs), partnerships, trusts, or similar entities, not readily tradable on an established U.S. or foreign securities market; real estate; and option contracts or similar products not offered for trade on an established U.S. or foreign option exchange. Code K will also be used for distributions that include assets not having a readily available FMV. Custodians are accountable for valuing all assets held in IRA accounts, even when FMV is difficult to derive.
On Form 5498 for 2014, new boxes 15a and 15b have been added. Box 15a will report the FMV of investments in the IRA that are not readily tradable on an established U.S. or foreign securities market or option exchange, or do not have a readily available FMV but for which an FMV must be determined on an annual basis. Box 15b will show a category code indicating the type of investments held in the IRA for which the FMV is reported in box 15a. A maximum of two codes can be entered in box 15b, so if more than two codes need to be entered, that is to be indicated by using code H. The codes for box 15b will be:
- A — Stock or other ownership interest in a corporation that is not readily tradable on an established US or foreign securities market;
- B — Short or long-term debt obligation that is not traded on an established securities market;
- C — Ownership interest in a limited company of similar entity (unless the entity is traded on an established securities market);
- D — Real estate;
- E — Ownership interest in a partnership, trust, or similar entity (unless the entity is traded on an established securities market);
- F — Option contract or similar product that is not offered for trade on an established US option exchange or established foreign option exchange;
- G — Other asset that does not have a readily available FMV;
- H — More than two types of assets (listed in A through G) are held in this IRA.
Marianne Couch has authored a number of blog posts on tax information reporting, trust tax, and FATCA topics. Visit her archives page to view all of her posts.
Visit www.cokala.com to learn how COKALA Tax Information Reporting can help your organization.