IRA – Question about disbursements from Refinance proceeds

Submitted by CHEONG AU on Fri, 2014-05-30 17:57

I have an IRA account that I directed to invest into a real estate fund. The real estate fund triggered a refinance of the property, thereby, creating a cash disbursement of refinance funds, which I believe is non-taxable. The property was not sold and remains as is.

My IRA account is telling me that these proceeds can be released along with a 1099-R, thus making these funds taxable.

My understanding is that refinance funds are not taxable.

Even with a 1099-R issued, how do I classify the funds as non-taxable proceeds since this is not income or capital gains?

Thank you!



Submitted by Alan - IRA critic on Fri, 2014-05-30 22:44

You may need to provide more info about his this investment works, and the type of firm who is the custodian. Is this a self directed IRA? Generally, any cash available after re financing would stay in the IRA and not be distributed because distributions will trigger a 1099R and taxes, unless the distribution is rolled over within 60 days. Who is asking for a distribution?

Submitted by CHEONG AU on Fri, 2014-05-30 22:46

myself…Since this is not an income or gains proceeds, I am hoping to have the IRA acocunt release those funds to me personally.

Submitted by Alan - IRA critic on Fri, 2014-05-30 23:16

Then if the IRA custodian distributes the funds to you, a 1099R will follow next January and you will be taxed on the amount of the distribution unles your IRA has basis from non deductible contributions you made. There will also be a 10% penalty unless you are 59.5 or qualify for a penalty exception. Gains or losses within an IRA are not taxable events, because IRAs are tax deferred accounts. But when you withdraw funds, taxes will be due.

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