Regular IRA contributions must be made in cash or checks. Contributions of securities are not allowed. Internal Revenue Code Section § 219(e)(1) and IRS Publication 590 provide detailed information about IRA contribution rules.

Exceptions apply to rollover contributions if the same security was distributed.

Advisor Insight

Ali Hashemian, MBA, CFP®
Kinetic Financial, Los Angeles, CA

You must use cash or checks to fund your Roth IRA contribution for the year. The rationalization for this is the simple fact that the unrealized gains in the stocks in which you invested must be realized at some point in a non-qualified account. This is the entire reason and main advantage for funding a Roth IRA - to avoid the capital gains tax that would otherwise have to be realized at some time in the future.

For this reason, you may want to consider selling stocks that have declined in value and realize the losses as this can serve as a tax advantage. At the same time, consider earmarking highly appreciated stocks for things like charitable contributions or charitable remainder trusts (CRTs). Doing so will help reduce your taxes.