Private Bank Stock

[alldodge]

I understand stock but don't fully understand private stock, much less private bank stock (BS).

Mom has 100 shares of BS in her IRA. Bought it years ago for $39 and they say its worth $70. The issue is it doesn't (according to bank folks) go thru the SEC so if it sells for less the $70 it does not impact the value of the rest of the shares. So if she puts it up for sale, individuals are notified that the shares are available. Then each person contacts Mom and makes offers.

I'm thinking that she could buy them her self for let say $1 a share and sell later. This way it gets it out of the IRA and can be used later, lets say. There are things missing from this issue but the basic question is, how do BS work and are they tracked at all?

 

[64osby]

I would talk to your accountant or financial adviser.

To me it looks like a cost basis of $39. Selling to yourself for a loss might not cut the muster of IRS regs.

 

[aspeck]

In the IRA you are not going to pay taxes... sell it at a loss in the IRA doesn't help you tax wise, and then you would have it out of the IRA at a $1 cost basis. From the tax side, that would make no sense at all. And yes, it is all reportable and a paper trail. The bank will follow the transactions.

 

[alldodge]

Agree, if she could buy them from her self, then those funds are reportable. After sleeping on it, don't see any way she could buy them from her self. The reason to even think about selling them, is we are moving her IRA to Vanguard and those will not transfer. She has already taken her yearly payout so she doesn't want to take anymore.

I think maybe the way to do it, is I could buy them and then sell them back later. I would call my accountant but not until May, he needs rest after the 15th.

My big question is does anyone know how BS work? How does their value increase or decrease if the transactions have no impact on the posted value?

 

[aspeck]

They increase and decrease based on the valuation of the bank multiplied by a times earnings ratio. It is the bank's worth and earnings that drives the price of the stock.

 

[alldodge]

Thanks, had to look it up. Since stock can be bought and sold at any price, then guess my next question may be for the IRS.

 

[dwco5051]

Take a few minutes and google "stock wash sale". The tale is the IRS frowns on such things The problem with unlisted stocks of small capitalized entities is you have to find the buyer and if only the bank wants to buy it that is the price you will get.

 

[alldodge]

Don't plan to do this

The rule defines a wash sale as one that occurs when an individual sells or trades a security at a loss, and within 30 days before or after this sale, buys a ?substantially identical? stock or security, or acquires a contract or option to do so.

Our whole thing is to buy the stock which puts the funds into her IRA so that it can move with the rest of the IRA. Later sell it back at the same cost so in essence no funds have wound up in her hands from the IRA. If she ever does sell it later then there will be capitol gains just not income tax. This is where the rub comes in. I don't want the stock and there is no telling even with the Bank saying its worth 70 a share, its only worth that IF someone is willing to pay that for it.

Did find info on private equity companies which are springing up to buy some of this kinds of stuff

 

[aspeck]

MOST private stock banks in this area are good investments with several established holders always willing to gobble the stock up at the bank valuation price. That is a generalization, not a rule. It might be different in your area. The fact they stock value has gone up is a good indicator of POTENTIAL growth, but not a guarantee. If you don't want to purchase it, the bank probably has a list of people waiting for the stock to come available, and most of them are large stake holders of the bank already (again, generalizations).

No problem with a wash sale, just hold onto it for a while. Don't do an immediate change of ownership back to Mom.

 

[alldodge]

This is a small town bank and the person up to this point giving me info is the bank person who has been managing Mom's IRA for the last 15 years or so. Good guy but when your talking to the person who has been making money off her for a long time (900 a quarter +), I'm just hesitant. He's probably a straight shooter but says it can take some time to get it sold. During this time the bank would only be charging Mom 250 a quarter for it, some break.

Thanks much appreciate it