topic Does an RMD have to be taken i cash or can it be taken in an equivalent amount in stock? in Investors & landlords

Does an RMD have to be taken i cash or can it be taken in an equivalent amount in stock?

rfitz80 — Tue, 15 Dec 2020 17:51:21 GMT

I want to talk to someone

Re: Does an RMD have to be taken i cash or can it be taken in an equivalent amount in stock?

VolvoGirl — Tue, 15 Dec 2020 17:52:11 GMT

Did you ask your IRA or 401K plan?

Re: Does an RMD have to be taken i cash or can it be taken in an equivalent amount in stock?

Hal_Al — Wed, 16 Dec 2020 01:26:43 GMT

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.

Re: Does an RMD have to be taken i cash or can it be taken in an equivalent amount in stock?

fanfare — Wed, 16 Dec 2020 04:09:41 GMT

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.

Re: Does an RMD have to be taken i cash or can it be taken in an equivalent amount in stock?

NCperson — Thu, 17 Dec 2020 04:22:19 GMT

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.

Re: Does an RMD have to be taken i cash or can it be taken in an equivalent amount in stock?

Anonymous — Thu, 17 Dec 2020 04:35:57 GMT

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

Re: Does an RMD have to be taken i cash or can it be taken in an equivalent amount in stock?

macuser_22 — Thu, 17 Dec 2020 04:52:09 GMT

@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.)

Re: Does an RMD have to be taken i cash or can it be taken in an equivalent amount in stock?

NCperson — Thu, 17 Dec 2020 12:30:23 GMT

@macuser_22 - well stated and that is my personal approach for my RMD's for all the reasons you state.

Re: Does an RMD have to be taken i cash or can it be taken in an equivalent amount in stock?

rfitz80 — Thu, 17 Dec 2020 21:43:36 GMT

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

Re: Does an RMD have to be taken i cash or can it be taken in an equivalent amount in stock?

NCperson — Thu, 17 Dec 2020 22:32:13 GMT

<<And that would be my new cost basis>>

isn't your new cost basis zero? this is an RMD from an IRA, right?

Re: Does an RMD have to be taken i cash or can it be taken in an equivalent amount in stock?

Opus 17 — Thu, 17 Dec 2020 22:36:22 GMT

@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.

Re: Does an RMD have to be taken i cash or can it be taken in an equivalent amount in stock?

fanfare — Fri, 18 Dec 2020 00:35:08 GMT

" 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.

Re: Does an RMD have to be taken i cash or can it be taken in an equivalent amount in stock?

fanfare — Sat, 19 Dec 2020 23:34:58 GMT

Looking at my TD account differently (different web page), I see that the in-kind stock transfer basis is shown correctly.