IRa MRD
My sister is 70 1/2 and is planning to start her MRD. She has both an IRA and brokerage account at the same firm. She has stock in her IRA account.
I read she can transfer stock from her IRA account to her brokerage account that matches (as close as possible) her MRD.
She will pay taxes (ordinary income) on the MRD. My question is about the stock. Once the stock is in the brokerage account and she decides to
sell it, can she claim a loss on her taxes (e.g.; purchased at $80 a share in 2001 and now worth $20 a share).
Permalink Submitted by Alan Spross on Wed, 2008-02-13 00:05
Your first paragraph is correct. However, the transferred shares carry a cost basis in the brokerage account equal to the fair market value on the day of distribution from the IRA.
The reduction of value in the shares while in the IRA is not deductible. That reduction only serves to reduce the tax impact upon distribution of the assets.
If she has a basis in her IRA due to making non deductible contributions, then some of the RMD will be tax free. The amount is determined by Form 8606, the same form that should have been completed if after tax contributions were ever made. However, the cost basis of the shares transferred to the brokerage account is not affected by any tax basis included in the IRA.