RMD IN ILLIQUID IRA
I AM 72y.o. Requiring RMDs on IRAs. I have an illiquid IRA that is in receivership. The custodian still sends an estimated value based on original investment amount with a RMD amount stated. This IRA is illiquid. Am I still required to do an RMD. I was told to file Form 5329 to request waiver of RMD for this IRA which has no value at this time.
Permalink Submitted by Alan - IRA critic on Thu, 2022-12-08 20:06
If you have other IRAs you can complete the RMD for the illiquid IRA from one or more of the others. If no other IRAs, then the IRS will waive the penalty if you file the 5329 indicating the “reasonable cause” for not being able to complete the RMD. Since your first RMD is not late until 4/1/2023, any 5329 filed would be for 2023, not 2022. Note that the custodian should be making an effort to determine the 12/31 FMV for reporting on Form 5498 and should not be using the original purchase price. That should lower next year’s RMD considerably. Yet another possibility is distributing the investment in kind to a taxable brokerage account, but again the value distributed should reflect the current situation. A partial in kind distribution might not be possible depending on the situation. An RMD is satisfied by an in kind distribution just as if cash was distributed. Also, note that your first RMD is not due until 4/1 of the following year allowing some additional time which may or may not be useful.