Bitcoin “in kind” distribution from a mature IRA

[Rolo4]

I have a mature Bitcoin IRA. If I wanted to remove a Bitcoin, “in kind”, from my IRA and transfer it to my own personal hard wallet, would this trigger a taxable event or no? Is it considered a distribution even though it’s not being converted to cash, and once it is out of my IRA and in my hard wallet, is it now subject to capital gains tax instead of income tax when I do sell it into cash?  Whew, that was a lot of questions, sorry.

Thanks for any education on this matter.

[Mike9241]

yes it would be a taxable distribution as ordinary income based on the Fair Market Value (FMV) on the date of distribution. when you sell it you now have a capital gain or loss depending on whether the sales price is more or less than that  FMV. your holding period starts on the day after distribution.

[Rolo4]

Thanks for this great educational information!
I’m sure many people in the crypto space can utilize this info as tax season is on the horizon again and there are so many unknowns, especially tax rules regarding this new technology.

Thanks again

[fanfare]

"I have a mature Bitcoin IRA."

what is your definition of mature IRA or mature Bitcoin IRA?

I never heard of it.

@Rolo4 

[Rolo4]

For me a mature IRA is one belonging to someone 60 or older and able to make withdrawals without penalties.

[Opus 17]

This would be similar to owning, for example, Apple stock inside your IRA.  You can take the stock out as stock, without converting it to cash along the way, but it is the act of taking it out of the IRA that triggers the taxation of the asset or income.

Then, you have a new cost basis equal to the cost that you paid tax on.  BTC is about $17,000 today, that's what you will pay tax on if you move it from the IRA to a personal wallet (the exact price on the specific day it happens). Then, any gains or losses in the future will be based on that price, rather than the price you originally paid when you invested in the IRA.