RMD for IRA with stocks

[oceanlovin'ea]

Client has reached the time when she is required to take RMD of her IRA. Her IRA funds are invested in stocks. So it is not as simple as withdrawing the required amount from a savings account. How does she go about this? Must she sell some of her stock portfolio in order to take the RMD? Does it matter what she sells? The dividends are reinvested so there is no cash account with funds in it.

Thanks

Linda F.

[Jiggers]

She needs to discuss this with her broker who handles her IRA. And determine which ones the broker will sell.

[Rapid Robert]

Property distributed from an IRA could be the actual shares of stock, if the brokerage supports it. But I think it is easier, and much more common, to distribute cash, so normally she would sell sufficient stock to generate the cash distribution. In this case, no it doesn't matter what she sells for tax purposes (no wash sale concerns), although for investment purposes, she might want to re-balance her portfolio after the distribution.

[oceanlovin'ea]

I don't think she has a broker. She mostly has Roth IRA's. She did say she looked at the formula and thinks she needs to take out about $900. I will make sure the amount is correct and tell her to sell shares worth that amount of money.

Thanks for your help.

[ttbtaxes]

As Feduke404 said. Roth IRA has no RMD requirement. If it is a traditional IRA, I can't fathom a reason not to sell the required number of shares of some stock/fund to get to the desired RMD amount.

[Rapid Robert]

I can't fathom a reason not to sell the required number of shares of some stock/fund to get to the desired RMD amount.

One reason would be to avoid the transaction charges for selling and then re-buying the same stock, plus missing possible market gains for the period between sale and re-purchase. Simply transferring the stock out of the IRA would avoid both these problems.

[Rapid Robert]

Interesting approach.
What happens to tracking the cost basis, especially if covered shares, of the stock that exits the Traditional IRA and lands elsewhere in, I assume, a taxable account?
Likewise, how is the total dollar amount of the "distribution" from the Traditional IRA account, to be reported on a 2018 Form 1099-R to satisfy the RMD amount, calculated?
( FWIW - Many people don't even glance at stock transaction charges, which now can often be only $5 - $8 total. )

First, I'm not saying it's common or that I recommend it, but I can find no rule requiring IRA distributions to be made in cash. As for the new basis and taxable distribution, it would just be the FMV of the shares at time of distribution. As for transaction fees, yes some are low, but mutual fund transaction fees usually are not so low, and it may not be possible or desirable to meet the RMD amount via a single sale (if distributing cash), so there could easily be a number of transaction fees involved.