Initial year RMDs – all or nothing?

Submitted by Levi Brandriss on Tue, 2015-04-07 23:00

Are RMDs all or nothing?

EX: Client is 70.5 in 2015, so not required to begin until 4/1/16, but then has 2 distributions in ’16 vs. 1 in ’15 and 1 in ’16.

If Client wants to take out a portion of his first year RMD in 2015 and the remainder in tax year 2016 (by 4/1/16), does that work?

Just to further the example with numbers, say the RMD for 2015 is $10,000. Can the client take $2,500 in 2015 and $7,500 by 4/1/2016?

Many thanks, Levi



Submitted by Alan - IRA critic on Tue, 2015-04-07 23:50

Yes, the first RMD distribution year has only one requirement – that the entire distribution be completed by 4/1 of the following year. Client can distribute anything between 0 and 100% of the 10,000 in 2015. This flexibility only occurs once, but if carefully planned client can manage it to pay the lowest possible amount in taxes for the two years combined.



Submitted by Levi Brandriss on Wed, 2015-04-08 13:01

Much appreciated – any chance you have a source on this? I know you are clearly an expert on here based on responses, but a client’s CPA was asking this question, and likely wants me to point somewhere.Thanks!Levi



Submitted by Alan - IRA critic on Wed, 2015-04-08 21:17

There is no direct refererence, but this portion of IRS Reg 1.401(a)(9)-5 applies to the first distribution year and the required beginning date. Note that the ONLY requirement is that the RMD for the first distribution year be completed by the RBD. There is no restriction on how that first distribution year RMD be divided between the two years:

(b) Distribution calendar year. A calendar year for which a minimum distribution is required is a distribution calendar year. If an employee’s required beginning date is April 1 of the calendar year following the calendar year in which the employee attains age 701/2, the employee’s first distribution calendar year is the year the employee attains age 701/2. If an employee’s required beginning date is April 1 of the calendar year following the calendar year in which the employee retires, the employee’s first distribution calendar year is the calendar year in which the employee retires. In the case of distributions to be made in accordance with the life expectancy rule in § 1.401(a)(9)-3 and in section 401(a)(9)(B)(iii) and (iv), the first distribution calendar year is the calendar year containing the date described in A-3(a) or A-3(b) of § 1.401(a)(9)-3, whichever is applicable.  (c) Time for distributions. The distribution required to be made on or before the employee’s required beginning date shall be treated as the distribution required for the employee’s first distribution calendar year (as defined in paragraph (b) of this A-1). The required minimum distribution for other distribution calendar years, including the required minimum distribution for the distribution calendar year in which the employee’s required beginning date occurs, must be made on or before the end of that distribution calendar year. 



Submitted by Levi Brandriss on Fri, 2015-04-10 14:39

Appreciate the responses



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