IANAL, IANACPA, and the more I read, the more confused I get. Would this approach allow me to effectively (but not literally) keep my TSLAP interests in a self-directed IRA (401K rollover), a non-deductible IRA, and my personal (non retirement) investment account? My mind has been spinning about whether or not I should donate shares in the investment account to the non-deductible IRA in case I have to cash out the investment account in order to preserve the shares in the 401K rollover (since something I read in this forum implied I can’t have both).
Hoping I have time to figure this out before I should’ve done stuff...
This is just so crazy. And with stock so “on sale” I’m tempted to double-down a bit and buy more - but in which account? Oh my head hurts...
Qualified pension plans, including IRAs, Roth IRAs, SIMPLE IRAs, are trusts. (Read all about them in IRC 400 onward. Fun stuff.) The trust/trustee is the
legal owner of the assets, while the person is the
beneficial owner. You are the beneficial owner of your Rollover IRA and your traditional IRA, while your broker/bank/mutual fund company is the legal owner as trustee. These are special kinds of trusts ginned up by Congress to defer income taxes and provide for retirement. They enjoy some benefits of ordinary trusts, but have their own special place in the law.
You state that you have both a rollover IRA [from your 401(k)] and a traditional IRA. You ought to have two separate accounts/trusts for those two different accounts. Don't have to, but it makes one's life much easier when our lives take crazy twists and turns. Regardless, since you have a traditional IRA that was non-deductible, you have
basis in your traditional IRA. You should have been filing form 8606 each year with your 1040 to inform the Service what your basis is in all your IRAs. Because . . . .
When we finally take distributions from our IRAs, (except for Roth IRAs) we cannot pick and choose which ones we take the funds from in order to report any income on our returns. Whether we have one IRA or twelve, the balances of all our IRAs at 12/31 of the prior year serve as the denominator of a fraction. Our basis in our IRAs (read non-deductible IRA) serves as the numerator. That ratio is then multiplied by the dollar amount of the distribution to determine the taxable portion of the distribution. For example:
Balance at 12/31/25 of your rollover IRA from the 401(k): $750,000
Balance at 12/31/25 of your traditional IRA (all non-deductible) 125,000
Total IRA at 12/31/25 $875,000
$125,000/$875,000 = .1429. Accordingly, if you receive a distribution from one or both of your IRAs in 2026, one-seventh of the distribution will be a recovery of basis and is tax-free. Your $35,000 distribution would be taxed on $30,000. While you could choose to take the distribution from the Tesla stock, non-deductible account, you will still have to pay income taxes on 6/7 of the distribution or vice-versa if you took the distribution from your rollover IRA.
Self-directed simply means that you choose the investment allocations, buys and sells, etc, rather than having a third party do the investing for you. But there will always be the trustee to hold title to the assets and do all necessary compliance reporting.
I am unclear, nor do I remember anything at all about any prohibition on owning shares individually and through a qualified plan.