RMD of Index Funds held with in an IRA
Sorry if these questions are stupid but these rules / laws keep me confused .
1. Can RMD come “out” as shares from any given index fund holding as long as the value of the shares on trade date represent the RMD amount or must shares be sold and RMD comes out as cash?
2. If shares are “not” sold and come out as shares , can they be stepped up
at owners death(if not sold during owners life)/
3. Is answer to 1 & 2 the same if the RMD is taken by a non-spousal
beneficiary upon death of owner?
4. If non-spousal beneficiary does not sell the stock represented by the RMD can these shares be stepped up again upon death of non-spousal beneficiary?
5. If beneficiary is a legitimate look-thru (conduit trust) and it pays out the RMD to the beneficiary in shares , would answers to all 4 above be the same?
6. Can shares representing the RMD be paid out of the IRA within the trust,
continue to remain in the trust and be stepped up at some latter date when they come out of trust ?
7. Can 6 above be done ????
Thanks
6.
Permalink Submitted by Alan Spross on Wed, 2008-06-18 04:39
Newt,
1) RMDs or other distributions can be distributed “in kind”. The share basis in a taxable account is the fair market value upon distribution.
2) Yes, such shares receive a basis adjustment upon the death of the owner, since they are no longer in a tax deferred account (with the exception of NUA which is considered IRD).
3) Yes, same answer for distributions to a beneficiary, spouse or non spouse.
4) Yes.
5) Shares can be distributed to a trust, but a look through trust must be irrevocable by nature. I think that means that no basis adjustment occurs within the trust if the beneficiary passes, but not totally sure if the trust is a conduit trust. Once the shares are distributed out of trust to the beneficiary, and the beneficiary passes, a basis adjustment would apply.
6) See above. Any basis adjustment would apply after the shares were distributed out of trust AND the beneficiary also passes. IF the beneficiary remains alive, their basis would be the value upon distribution from the IRA, not the trust.
Permalink Submitted by Newt Pearson on Wed, 2008-06-18 14:06
alan
Thank you