In the unfortunate event that an asset in your self-directed IRA has become uncollectible, unredeemable, or has otherwise been determined to no longer carry value, there are several important steps you can take to mitigate the overall effects. Our zero valuation process allows you to officially assign a value of $0 to your asset and, upon distribution, eliminate any tax or penalty implications. Let’s explore some common questions or concerns that may arise from self-directed investors in these situations:
Why can’t I just tell New Direction Trust Company that my asset is worthless? The IRS requires that all distributions are reported as income, including in-kind distributions of assets with no value. As with fair market valuations, and all other matters related to self-directed investing, proper documentation must support the updated valuation of the asset. As such, you may contact our office to initiate the zero valuation procedure (discussed below), but we’re unable to modify your account holdings solely by virtue of your notification.
What’s the process for submitting a zero valuation? To update and distribute a zero-value asset, please complete and submit the following:
- Zero Value Request – A statement that one or more assets in your account will be zero-valued. This must be submitted in writing (a phone call or e-mail will not suffice). A Zero Value Request in and of itself does not constitute completion of the zero valuation process.
- Fair Market Valuation Form – In addition to your Zero Value Request, the Fair Market Valuation Form provides further written notice that the value(s) of one or more asset in your account will be updated. In this instance, the value will be updated to $0.
- Proof of Zero Valuation – Official documentation from a qualified third-party valuator to affirm that the asset or assets in question no longer have monetary value.
- Distribution/Notice of Withholding Form – Your request to remove the asset(s) from your account. This must occur last in the zero-value sequence, after completion of the items above. If the zero-value process is not completed prior to the in-kind distribution of your asset, the most recent fair market value of said asset will be reported as income on your Form 1099.
See our Zero Value Packet for more information, copies of the forms listed above, and examples of acceptable supporting documentation. Completed paperwork may be faxed to our office at 303-665-5962 or scanned and e-mailed to firstname.lastname@example.org.
Can I get a break on my account fees? In some cases, yes. We will suspend annual administrative fees for the applicable assets if:
- You submit a Zero Value Request to our office. However, if no further action is taken within 12 months of the submission, suspended fees will be assessed and normal billing will resume.
- New Direction Trust Company receives valid notification that a business or entity in which your account is invested has become the subject of a criminal investigation, or that investors in said business or entity are believed to have been defrauded.
For more information about zero valuations or self-directed retirement in general, feel free to call New Direction Trust Company at 877-742-1270 or send us an e-mail at email@example.com.