Custodian Assigns Incorrect Fair market value on year end statement
I owned 6,000 shares of CDOR which paid a liquidating distribution of $47,640.00 on Dec. 31, 2021. The remaining stub has little or no value. But on the 2021 year-end IRA statement, Fidelity incorrectly assigned a value of $47,700 to the stub position based on the closing price on December 30, 2021. Because of this, fair value used to compute RMD for 2022 was inflated by the $47,700.
Fidelity has since corrected the current value of the CDOR stub position position down to zero, but says it is too late to change the year end IRA statement which is used to compute RMD. What is the best way to handle this?
In my case, I have other assets that I can use to pay the extra RMD. By I was wondering what someone would do if this was the only asset in the IRA. There would be no way to pay the RMD from the account. I suppose the same thing can occur if someone owned a security that suddenly went bankrupt or they owned something like RSX as the only holding in the IRA.
Permalink Submitted by Alan - IRA critic on Tue, 2022-03-15 02:09
There is never an RMD penalty if the balance in all IRA accounts is smaller than the RMD amount. The taxpayer cannot distribute more than the available balance.
As to this error, while your year end balance that had to be provided by 1/31 cannot be changed, Fidelity must send Form 5498 to the IRS by 5/31 with the correct FMV as of year end. If they do this, the IRS will not be looking for your RMD to reflect the 47,700. Further, the Form 5498 Inst state that the IRA custodian must correct any incorrect figures for the year end FMV sent to the IRS even if they do not revise the 1/31 notice to the employee.
Even if they fail to correctly advise the IRS, and you have conclusive documentation that the year end value of that investment is 0, I would not reflect the incorrect value in my RMD. Take out the correct RMD and maintain your documentation in case the IRS challenges your RMD.
Permalink Submitted by George Spritzer on Thu, 2022-03-17 19:00
Alan- I forwarded your comment to Fidelity on my RMD issue in a secured email. They got back to me today and have set up a Work Order to correct the FMV of my IRA and file a Form 5498. Once corrected, a new Form 5498 will be sent to me and the IRS. Thanks again for your help!