RMD
I have a client who is 74 and has an IRA investment with another firm and is illiquid but she receives notice of the RMD required amount each year. Last year we took the amount from another IRA, however could we request from the IRS relief from the RMD until this investment is liquid? Thanks.
Permalink Submitted by Alan - IRA critic on Wed, 2023-03-15 15:53
No. The IRS does not have authority to waive or postpone RMDs, and because of the reduced excise tax from 50% to either 25% or 10%, it is expected that the IRS may be less likely to waive the excess accumulation penalty in the future. Taxpayers need to maintain liquidity in at least one IRA to meet the RMD requirements of all IRAs. In some cases where there is no such liquidity, a portion of the illiquid investment can be distributed out of the IRA to satisfy the RMD. If the illiquid investment is real estate in a self directed IRA, distribution of a % of a property will satisfy the RMD, but the resulting split ownership between IRA and personal can be prone to prohibited transactions and more complex tax reporting (eg partial depreciation etc). Certain illiquid investments in an IRA can also require appraisal or other valuation research to establish the correct year end value of the holding on which the following year’s RMD is calculated for that account. Fortunately, the IRA RMD aggregation rules do provide enough flexibility to resolve most of these RMD challenges.