RMD AS CAPITAL GAIN

Submitted by michael sisak on Thu, 2023-09-28 18:33

To meet the 2021 RMD, ICA mutual funds shares were sold.
I reported the $17G total that met the RMD on
Schedule D minus the $11.5G original cost computed
by Park Avenue. So there was a $6.5G capital gain.

Because that $17G RMD amount was not posted
on the 1040 as an IRA distribution but instead
as a capital gain, IRS added $17G as taxable income
with proposed penalties, etc.

Why can’t mutual fund assets be sold to meet an RMD and
the cost of those assets be deducted as a capital gain?
It seems unfair to lose the cost of the investment.



Submitted by Alan - IRA critic on Thu, 2023-09-28 19:36

  • An RMD is ordinary income as there are no cap gains or losses in an IRA.  Are you sure these mutual funds were in your IRA? If so, you should have received a 1099R for the RMD IRA distribution and the distribution goes on line 4 of Form 1040 not on Sch D. But if you sold the funds in a taxable account, then you would receive a 1099 B and would report any gain on Form 8949 and Sch D.
  • Remember that unless you made non deductible contributions to your IRA, any IRA distribution is fully taxable as ordinary income because you never paid taxes on any of your IRA balance.


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