IRA MRD and Capital Gains

Forum|Forum|2 years ago
October 15, 2023
4 replies
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I have an IRA and securities were sold to pay a Minimum Required Distribution (MRD). Do I have to pay both capital gains tax AND the ordinary income tax on the distribution?

Best answer by dmertz

Expert Reviewed

The distribution from the IRA is taxable and is taxable as ordinary income and is entered into TurboTax by entering the Form 1099-R.

If the MRD was done as an in-kind distribution of the securities, the cost basis of the securities outside the IRA would be the value on the date of distribution from the IRA and the holding period for capital gains would begin on that date, as if you had purchased the securities on the date of distribution. The subsequent sale of the securities would be reported separately on a Form 1099-B as non-covered securities for which you would have to supply the basis and holding period (long-term or short-term) when entering the Form 1099-B into TurboTax.

Anonymous_

Level 15

@CA_Tax_Payer wrote:
Do I have to pay both capital gains tax AND the ordinary income tax on the distribution?

No, just any tax due on the distribution.

Hal_Al

Level 15

Q. Do I have to pay both capital gains tax AND the ordinary income tax on the distribution?

A. No. Distributions from an IRA are taxed as ordinary income. The fact that securities were sold, within the IRA, to generate cash is irrelevant. Capital gains tax rates do not apply to the distribution.

dmertzAnswer

Level 15

Expert Reviewed

The distribution from the IRA is taxable and is taxable as ordinary income and is entered into TurboTax by entering the Form 1099-R.

VolvoGirl

Level 15

And that is one of the disadvantages to IRA accounts. You do not get capital gains tax treatment for sales. The distributions are taxed as ordinary income.