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Ask the Expert: More about 'in kind' required minimum distributions from IRAs

Regarding your article about returning "in kind" Required Minimum Distributions from IRAs, if you withdrew 100 shares of stock worth $20 each (a $2,000 withdrawal); and then their value dropped to $15, and you rolled 100 shares back into the IRA (a $1,500 rollover), what happens to the $500 loss? I think the $500 must be accounted for as an RMD distribution.

Nope. The $500 loss is your misfortune, but it's not a taxable distribution.

After Congress waived the 2020 RMD obligation, the Internal Revenue Service gave retirees who had already taken 2020 RMDs until Aug. 31 to redeposit them if they wished. People who had taken their RMDs in shares of stock — a withdrawal called "in kind" distribution — had to replace the RMD "in kind." That means they had to return to the IRA the same number of shares they had withdrawn.

It doesn't matter if the value of the shares changed in the interim. "As long as the same number of shares are returned to the IRA, that would cancel out what would have been a taxable IRA distribution," says Ed Slott, a Rockville Centre tax accountant.

If you took out 100 shares of stock valued at $2,000 and the value is only $1,500 when you want to return it, can you make up the $500 difference with cash?


You could add a $500 2020 IRA contribution, provided you have at least $500 of 2020 earned income. (The age limit for traditional IRA contributions was eliminated late last year.) But if you don't have earned income, you're ineligible to make IRA contributions — so if you added $500 when you returned your "in kind" RMD, you must remove it.

The bottom line

Replacing an "in kind" RMD may result in a financial loss.

More information

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