RMD Tradiitonal IRA
Client has two non-performing illiquid investments (60,000 in a limited partnership was paying 12% now flat) and a 5 year bond paying 12%, now flat) What does he do for this tax year? Does it still count fully for the RMD formula with the balance of his IRA?
Permalink Submitted by Alan Spross on Fri, 2010-03-05 21:25
Note pages 13 and 15 in the att’d article on prohibited transactions. First, there is a valuation requirement for each asset at year end, and again when units or shares are distributed to determine the amount of an RMD taken in the event of distribution of the shares to satisfy the RMD. Generally, all IRA owners subject to RMDs should maintain enough liquid investments in their IRA to satisfy their RMD for at least 3 years. Of course, even if they have the liquid assets, the illiquid ones must be valued as of year end to determine total account value.
http://www.aba.com/NR/rdonlyres/D8BE9599-E5ED-4994-91CB-BF8B23A2AE7C/429…
There is no specific IRS relief rule for RMD deferral if there is nothing liquid to distribute and illiquid shares also cannot be distributed for some reason. In that case, they would just have to bypass the RMD, make them up later and request the excess accumulation tax be excused on Form 5329.