in kind rmd

Submitted by [email protected] on Wed, 2008-09-17 20:51

if a client does an in-kind distribution (a stock) for and ira rmd, what is the cost basis of that stock once it’s out of the ira. also if the client never sells the stock does the cost basis step up at death? thank you.



Submitted by Alan Spross on Thu, 2008-09-18 01:42

The cost basis is the market price on the day of distribution from the IRA. Some division of the share of the 1099R value that represents the shares by the number of shares may be needed to pinpoint that value.

Once in a taxable account with the cost basis determined as above, the shares will receive a basis adjustment for their value at the date of death or alternate valuation date, if applicable.

Note that the above applies irrespective of any basis in the IRA from Form 8606 that would make the RMD or other distribution less than 100% taxable.



Submitted by Kevin Galvin on Mon, 2018-10-15 17:05

Has there been any chnages to the tax laws regarding the adjusted cost basis for an in kind RMD? Comments above are from 2008. Thank you



Submitted by David Mertz on Mon, 2018-10-15 17:22

No changes.  When the taxpayer sells these shares, these shares will probably be reported on Form 1099-B as non-covered shares, requiring the taxpayer to supply the cost basis (the value on the distribution date) when reporting the sale of these shares on the tax return.



Submitted by Alan - IRA critic on Tue, 2018-10-16 00:16

  • Note that if a beneficiary inherited a 401k plan (instead of an IRA) holding appreciated employer shares, the death of the participant creates a new triggering event for NUA purposes.  A non spouse beneficiary will then have an RMD due to following year. A spouse beneficiary may or may not have an RMD due.  That beneficiary would have the option of requesting an LSD of the inherited 401k plan, including a direct rollover of the non stock assets to an inherited IRA or inherited Roth IRA (taxable direct rollover) with the appreciated employer shares transferring to a taxable account. For those employer shares, the cost basis would be taxed at the ordinary income rate in the distribution year and the NUA at the lower LTCG rate when the beneficiary sells those shares.  Additional gain in the first year after distribution will be taxed at the STCG rate. This distribution of shares would normally be large enough to satisfy the 401k beneficiary RMD for the LSD year. 
  • Subsequently this beneficiary of the participant will have an inherited IRA and taxable account holding the NUA shares yet to be sold. If the beneficiary then passes still holding such taxable account shares, the cost basis per share and any additional gain after distribution from the 401k will get a basis adjustment for the successor beneficiary, but the amount of inherited NUA will NOT get a basis adjustment because it is treated as IRD.
  • Therefore, these cost basis scenarios are complex and dependent on the order of events, such as distributions including LSDs, and death of participant or beneficiaries.   


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