As far as the IRS cares, it can be taken in stock. But, it is still treated as ordinary income cash. You cannot sell the shares after distribution and treat the distribution as a capital gain. Your cost basis in the shares becomes the cash value on distribution, not what the shares were originally purchased for in the plan.
As others have indicated, you have to ask the plan administrator if they can do this. Many (most?) will not.
get the distribution forms and look for the line that says
"Stock number of shares."
if you have an IRA with a broker you can do it.
it can be taken in cash or in kind.
Why do you want to take the transfer in kind?
there is no benefit as the cost basis is zero and in fact it becomes harder to calculate EXACTLY what the value of the stock was on the day of the distribution in order to ensure you are meeting the RMD. (this isn't an issue in 2020, because RMD = 0 for everyone).
I find it a headache to take these RMD's in kind and always take it in cash so i know EXACTLY how much was distributed and once I invest the proceeds i know my new cost basis EXACTLY.
also, your holding period starts with the date of distribution so even if the stock doubled in value the next day and you sold it that day. it would be a short term capital gain
@Anonymous wrote:
also, your holding period starts with the date of distribution so even if the stock doubled in value the next day and you sold it that day. it would be a short term capital gain
If the stock has that much volatility it has no business even being in a retirement account for a 70 1/2 plus year old in the first place. Much simpler to just sell some stock, take the distribution and use the cash to repurchase the same stock. The result should be almost the same with a lot less paperwork.
(I am assuming that you are asking about the future in 2021 because as pointed out above, there is no RMD for 2020.)
@macuser_22 - well stated and that is my personal approach for my RMD's for all the reasons you state.
Thanks for your response
My issue has been resolved. Cashing out a position to take the RMD has always bothered me.
I have been doing it for years and sometimes I didn't want to sell my position. What I have found is that is ok and not to difficult. Other then having to wait a long time for a broker to answer they were very helpful. The rep advised that the value of the transfer would be equal the the closing price of the previous day. And that would be my new cost basis.
Thanks again for the input
<<And that would be my new cost basis>>
isn't your new cost basis zero? this is an RMD from an IRA, right?
@NCperson wrote:
<<And that would be my new cost basis>>
isn't your new cost basis zero? this is an RMD from an IRA, right?
The taxpayer will get a 1099-R and pay regular income tax on the cash value of the withdrawal as of the day of the withdrawal. It doesn't matter if the withdrawal is made in cash or in securities. The cash value on which income tax was paid becomes the basis of the securities.
" the value of the transfer would be equal the the closing price of the previous day. And that would be my new cost basis. "
That's exactly correct.
Unfortunately, some brokers (e.g. TD Ameritrade) don't update the internal records correctly so you have to be careful.
I speak from experience.
When I look at my outstanding profit/loss on the position, it is wrong. I have the correct basis recorded in Quicken.