Illiquid IRA w/RMD Requirement

New client with sole asset in his IRA being illiquid. Can redeem in part or in full on 12/31 and would receive cash about 30 days later. Client is 76 years old and needs to take RMD of about $10K by 12/31. Also has a Roth IRA. Though not ideal, could a distribution from the Roth satisfy the RMD requirement? Another possibility would be to have client take the 2022 distribution when cash is received about 30 days after year-end and file Form 5329 with a letter of explanation. Not sure if there are other options and looking for best way to proceed.



A Roth distribution will not satisfy the RMD for a non Roth IRA. That leaves the 2022 RMD being taken in 2023 and a 5329 filed to request the penalty waiver. Therefore, there will be two RMDs taken in 2023, taxable in 2023. The IRS has been accepting most “reasonable cause” explanations for RMDs being late with a correctly filed 5329 after the late RMD was taken. Client could include the 2022 5329 with their 2022 tax return if the RMD is completed prior to filing.



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