Wash Sale Rules Also Apply To IRA Accounts

When you make a contribution to an individual retirement account (IRA), you cannot make a direct transfer of stock, bonds, or real estate into the IRA. If you plan to put $5,500 into a traditional IRA in 2017, you must actually deposit those funds into the account with cash. If you an account holding $5,500 worth of Brown Forman (BF.A) sitting in a taxable account at the same brokerage house that holds your IRA, you are not permitted to make a direct in-kind transfer of the Brown Forman shares from your taxable brokerage account to your traditional IRA.

Instead, you must convert the Brown Forman shares into cash and pay a capital gains tax on those shares and then use the remaining to fund the traditional IRA.

This raises the question: If you must sell something to make an IRA contribution for the current year, is there any strategy or … Read the rest of this article!