5% owner prior to RBD but not 5% owner at RBD (same year)
Client was a 5% owner but relinquished his interest in the same year he turned 70 1/2. Technically on the date he turned 70 1/2 he had less than 5% interest and is still working for the company. Can he defer his RBD until he is no longer working? Since you normally can defer taking the first RBD until April 1st of the next year should that be taken into consideration? In this specific case client turned 70 1/2 July 15, 2013. Plan year is calendar year.
Thank you.
Permalink Submitted by Alan - IRA critic on Fri, 2013-10-04 21:11
If client was a 5% owner at anytime in the plan year that ends in the CY client reaches 70.5 he is deemed a 5% owner. In your example client is a 5% owner meaning his RBD is 4/1/2014. Further, in years thereafter even though he is no longer a 5% owner his RMDs must continue. Once started under the 5% rule, the RMDs do not stop.