IRA Valuation of Ponzi Scheme Investments for RMD
What do I do for my required minimum distributions if I invested my IRA in a Ponzi scheme and it is now frozen by the SEC? It was last valued on 12/31 at $450k, but I can’t touch it or move funds due to the ongoing Ponzi scheme investigation by the SEC.
Permalink Submitted by Alan - IRA critic on Tue, 2021-08-31 17:59
The IRS will certainly waive the late RMD penalty in this situation, with a properly filed Form 5329. However, there is no solution to the twin problems of having no RMD this year and possibly several make up RMDs in a later year. Your 2022 RMD will also not be known since the 2021 year end value of the IRA could be anything from 0 on up. If 0, of course there will not be a problem of RMDs, but loss of value is of course much more costly than a large late RMD for multiple years when the account does not lose value. Finally, in the worst case scenario where your IRA is deemed worthless this year or deemed worthless on 12/31/2020, there will be no distribution or penalty since you cannot be required to take out more than the current account value.