In-Kind Transfer to satisfy RMD

Submitted by Robert Gibb on Tue, 2019-06-18 20:41

Is it possible to do an in-kind transfer of assets from an IRA to a taxable non-retirement account to satisfy an RMD? Can you also please site the IRS publication and section?



Submitted by Alan - IRA critic on Tue, 2019-06-18 23:44

  • Completion of the RMD is determined by the amount reported on Form 1099R as a distribution. Since an in kind distribution is reported on a 1099R using the value of securities on the date distributed, the IRS will not know or care whether you distributed cash or securities. The tax code only requires a distribution, so you can distribute cash, securities, or a combination of the two.
  • It is tough to control the exact value of securities when the distribution is actually processed, so if you want to hit your RMD on the nose you will probably have to distribute the securities totalling somewhat less than your RMD. Then check your statement to see what that value was, and top of the rest of your RMD in cash. The custodian will simply add the value of these two distributions on different dates when completing your 1099R.
  • If you transfer securities in kind to your taxable brokerage account, your cost basis per share is the value when distributed from the IRA, and the holding period starts anew on that date. Therefore, if you then sell securities in your taxable brokerage in the first year, any gains from the distribution date will be taxed at ST rates. But you will avoid a sales and repurchase commission by doing an inkind transfer.
  • To be clear, the IRS does not specifically address this because there is no need to.

Submitted by David Mertz on Wed, 2019-06-19 02:18

The only thing close to an IRS reference that I’m aware of is the instruction for box 1 of Form 1099-R which, as stated by Alan_iracritic, says that the amount includible in box 1 for a distribution of employer securities or other property (in-kind distributions) is the FMV on the date of distribution from the account.  With regard to RMDs, the tax code only refers to distribution amounts, and that’s what Form 1099-R reports.

Add new comment

Log in or register to post comments