Required Minimum Distributions (RMD’s) and your “investment”

Equitatus brings up an issue that has been discussed here and there, but we believe this topic is important enough to highlight and discuss:

Equitatus writes:

“I’m not asking for tax advise but my brother noteholder will be 70 this year. The following is from the IRS web site:

Required Minimum Distributions (RMDs) generally are minimum amounts that a retirement plan account owner must withdraw annually starting with the year that he or she reaches 70 ½ years of age or, if later, the year in which he or she retires. However, if the retirement plan account is an IRA or the account owner is a 5% owner of the business sponsoring the retirement plan, the RMDs must begin once the account holder is age 70 ½, regardless of whether he or she is retired.

How do make or account for an RMD when you funds are frozen?”

One thought on “Required Minimum Distributions (RMD’s) and your “investment”

  1. Some of us struggled with this question all of last year and were finally successful – we think – in getting the value of the RE Loans accounts reduced to 12 cents on the dollar ONLY for purposes of calculating the RMD. However, while that reduces the amount of the RMD under the IRS regs if the RMD is not taken there is a 50% penalty on the amount not taken. If the person has another IRA it is my understanding the IRS can ‘force’ taking the RMD for one IRA from the second IRA. That doesn’t solve the probelm of the person with only one IRA held in a totally illiquid account Early on Walter sent out a letter saying a RMD distribution could be made “in kind”, but that the election to do this had to be made by December 31, 2010. Even though made ‘in kind’, the ‘in kind’ distribution would nonetheless be taxable. I have no idea if anyone made an ‘in kind’ election. I have the problem because of my age. I intend to meet the IRS, through my accountant, to ‘discuss’ the situation. The same problem will apply for 2011 taxes and for each year thereafter so long as any of us have IRAs in this illiquid fund. Corrections to my understanding are welcome.

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