Dear AAL Employee,
It seems there may be some good news regarding the previously distributed Equity Stake in AAL stock. As you are probably aware, the equity stake had originally been treated as a TAXABLE distribution. Although, much discussion occurred at the time about the potential for it to be rolled directly into a retirement account, such as an IRA or Roth IRA. At the time, most pundits considered this a long shot, as it would require an act of Congress (literally). It seems that this long shot may come to fruition.
On December 11th, The House of Representatives signed bill H.R. 2591, which allows for the retroactive transfer of the AAL equity stake to a Traditional IRA or Roth IRA and EXTENDS the filing date (for 2013) to April 15th, 2015. The Senate subsequently passed an identical bill on December 13th, called S2614, which was in turn presented to the President on December 16th and was passed into law.
This is a link to the recent Congressional Bill.
First the disclaimer – We are absolutely NOT Tax Advisors of any kind and do not provide tax advice. You should ABSOLUTELY consult your Tax Advisor or Accountant before making any decisions regarding this matter.
That said, this is our general interpretation of the impact of the bill before the President, if passed.
- You will be able to reclassify up to 90% of the issued value of your total AAL equity stake (issued as part of the bankruptcy filing in 2013 & 2014) to roll it into either a Traditional IRA or Roth IRA.
- You will have to amend your tax filing for 2013 (by April 15, 2015) and appropriately reflect your 2014 equity stake on your 2014 tax return.
- You should be able to get a refund for taxes withheld if you elect to roll to into a Traditional IRA (pre-tax)
- You won’t get a refund if you elect to roll into a Roth IRA (post tax), but would still gain tax benefits vs. keeping it in a taxable brokerage account.
- Contributions you’ve previously made to a retirement during these relevant tax years won’t limit rolling your equity stake into a retirement account.
Things that are still unclear to us…..
- If you retained the AAL shares, can you deposit them directly into a retirement account regardless of value? Or are there further limitations based on the material appreciation in value of the shares?
- Can you roll your equity distribution into your 401(k)? Or would you have to roll it into an IRA and then subsequently roll it back into the 401(k) if you so desire?
Please consider our interpretation and questions solely as fodder for discussion with your Accountant or Tax Advisor. To further aid in your dialogue with your Accountant, we’ve enclosed a link to the excerpted 3 pages (of 300!) of the original legislation (FAA Modernization and Reform Act of 2012) that we think are most relevant to this issue. We’ve redlined the changes listed in the recent amendment passed by both houses of Congress.
We hope this is helpful. Please share any information on the topic you encounter. We’ll continue to share relevant information as it becomes available.
The Friedenthal Financial Team