Mandatory distribution questions

Submitted by GARY WHIPPLE on Wed, 2014-04-30 20:52

please, two related questions:

1) when I turn 70 1/2 may I satisfy my RMD by distributing shares instead of dollars from my TIRA? ie, if my RMD is $10000 may I have 100 shares of stock XYZ valued at $100 each distributed to my brokerage account and pay ordinary income taxes on that transaction ?

2)am I correct that I may not convert any of the shares that constitute a part of the RMD into shares in my ROTH account ?

thanks for your help



Submitted by Alan - IRA critic on Thu, 2014-05-01 00:34

  1. Yes, you can. This is called an “in kind” distribution. Your cost basis per share in the taxable account will be the value per share on the date of distribution from the IRA. The holding period starts on the date of distribution as well. This is true whether the distribution is an RMD distribution or not.
  2. Also correct. After your RMD has been distributed each year, you can convert addititiona distributions if you want, but the total of the RMD and the conversion could increase your marginal tax rate more than you want. The conversion window therefore looks better before RMDs begin and also before SS benefits begin as well if possible.

Submitted by GARY WHIPPLE on Thu, 2014-05-01 03:08

thanks very much   

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