Qualified Charitable Distribution question
A client turns 70.5 this October. His first RMD is $76,000.
In February this year he made a $25K charitable distribution to his church but has not satisfied the rest of his RMD for the year.
It is my understanding that for a QCD to be valid, the client needs to be already 70.5. TD Ameritrade indicates that they do not report whether a distribution was a charitable distribution or a regular distribution.
Is it possible to correct the situation by waiting until after the client turns 70.5 and then taking an exact distribution as the one in February and in a separate one the remainder of the RMD?
Or what other possible courses of action does he have so he doesn’t miss the deduction for the QCD
Any help is appreciated.
Thanks!
Permalink Submitted by Alan - IRA critic on Wed, 2016-06-01 20:50
You are correct. For a QCD client must have reached 70.5 to the day. In this situation the 25k is applied toward the RMD, but not a QCD. That leaves 51k remaining of the RMD unless he wants to defer all or part of that to 2017 no later than 4/1/2017. If he wants to do a valid QCD as of October, he can select any amount he wishes up to 100k since the first distribution was not a QCD, but would be added to his AGI and eligible for a charitable itemized deduction. In other words, he still has 51k of RMD remaining and 100k of QCD limits. A QCD can be less than, equal to, or more than the RMD, but not more than 100k. There is no way to make the first distribution a QCD, but he still has flexibility after October to do a valid QCD or all or part of the remainder of his RMD.
Permalink Submitted by Monica Jalife on Wed, 2016-06-01 21:06
He does not want to contribute another $25,000 to charity. Any other possible courses of action? Thanks for your help.
Permalink Submitted by Alan - IRA critic on Wed, 2016-06-01 21:29
If his initial plan was for a 25k QCD/RMD followed by a 51k RMD, he could attain that goal if he could convince the charity to return his prior donation in exchange for making a legitimate QCD in October of 25k. He then makes a 25k QCD in October and takes the rest of his RMD (26k) afterwords. He would end with the same tax result of 51k in his AGI and a 25k QCD to equal his total RMD of 76k. Maybe he should consider upping the QCD to 30k to entice the charity to return the original 25k to him.