RMD 3 card Monte??

[ripvanwinkle]

I soon have to take my RMD. I know nothing about tax laws. But I think I'm trying to do a 3 card Monte on the IRS. Here's my idea.

1. Transfer my traditional IRA RMD into another taxable stock account. Pay no tax up front since it is transferred into another taxable account.

2. Recharacterize the stocks when I move them into my Roth IRA and pay the tax then. The IRS gets its money and all is well with the world. Avoids paying taxes twice.

Is this a fools dream?

[MN-Investor]

Your traditional IRA is an a tax-deferred account. When you take out your required minimum distribution, that is, in and of itself, a taxable event for which you will receive a 1099-R. It doesn't make any difference as to where the money ends up.

[minnesotapaintlady]

Your Traditional IRA is not a taxable account.

[CCL]

You're gonna have to pay tax on the RMDs from the traditional IRA in the year of withdrawal.

Your plan's not gonna work.

[ripvanwinkle]

Jul 26, 2024 23:20:32 GMT -5 minnesotapaintlady said:

Your Traditional IRA is not a taxable account.

Yes I know. It's not taxable until you sell stocks out of it.

[minnesotapaintlady]

Jul 26, 2024 23:31:18 GMT -5 ripvanwinkle said:

Jul 26, 2024 23:20:32 GMT -5 minnesotapaintlady said:

Your Traditional IRA is not a taxable account.

Yes I know. It's not taxable until you sell stocks out of it.

But you can't just transfer stocks in kind to your taxable account from your IRA without it being considered a distribution.

[ripvanwinkle]

Jul 26, 2024 23:27:24 GMT -5 CCL said:

You're gonna have to pay tax on the RMDs from the traditional IRA in the year of withdrawal.

Your plan's not gonna work.

Well it was a shot in the dark. Curse the tax man.

[MN-Investor]

Jul 26, 2024 23:37:21 GMT -5 ripvanwinkle said:

Well it was a shot in the dark. Curse the tax man.

Actually, curse Congress. The tax man is only following the laws that Congress passed.

Paying taxes on the RMD is the price you pay for taking a deduction on your taxes when you funded your traditional IRA and for having the money grow tax-free for decades.

My RMDs start next year and I'm not excited about that at all. But, as my husband used to say... First World problems.

[Opti]

Jul 26, 2024 23:49:28 GMT -5 MN-Investor said:

Jul 26, 2024 23:37:21 GMT -5 ripvanwinkle said:

Well it was a shot in the dark. Curse the tax man.

Actually, curse Congress. The tax man is only following the laws that Congress passed.

Paying taxes on the RMD is the price you pay for taking a deduction on your taxes when you funded your traditional IRA and for having the money grow tax-free for decades.

My RMDs start next year and I'm not excited about that at all. But, as my husband used to say... First World problems.

I would say curse no one unless you want to curse out yourself. Rip took advantage of the tax rules for trad IRAs like many folks have. And when it comes time to pay taxes when they feel old and underfunded, they want to blame someone that isn't them. 

Its life. We make decisions based on what we think the future may be and sometimes its not the future we expected. The greed is good era of the Covid times made RE and housing wicked expensive. Trump handing Crimea to Putin on a platter basically keyed up Putin destroying part of the globe's breadbasket, Ukraine. So, I suppose if you want to blame someone, Trump and Putin are better than average choices . But really you need to blame yourself if you blame anyone. There wasn't a gun to your head to fund an IRA was there?

[Opti]

Jul 26, 2024 22:53:35 GMT -5 ripvanwinkle said:

I soon have to take my RMD. I know nothing about tax laws. But I think I'm trying to do a 3 card Monte on the IRS. Here's my idea.

1. Transfer my traditional IRA RMD into another taxable stock account. Pay no tax up front since it is transferred into another taxable account.

2. Recharacterize the stocks when I move them into my Roth IRA and pay the tax then. The IRS gets its money and all is well with the world. Avoids paying taxes twice.

Is this a fools dream?

I think MN-Investor said it well

1) Moving funds from a trad IRA to anywhere is taking a distribution. You should talk to a tax accountant.
RMDs are required by law and the amount and timing changes based on current tax laws.

[jerseygirl]

Opti - Crimea was invaded during Obama presidency in 2014. Ukraine under Biden

[Opti]

Jul 27, 2024 9:10:23 GMT -5 jerseygirl said:

Opti - Crimea was invaded during Obama presidency in 2014. Ukraine under Biden

Those are some facts, but far from all of them. To understand this one has to put away the two-dimensional chess board, i.e. X
happened when so and so was President, not me (Trump).

Russia felt forced into tearing down the Berlin wall, they would have preferred to stay their kind of insular possibly forever.
Putin's start with Crimea into the larger parts of Ukraine have been part a very long multiple decades type plan. 

Check out this article from the AP newswire roughly this time of year eight years ago.


apnews.com/general-news-events-united-states-presidential-election-cd6207ea7ba64914b078e0fd94ffbca6


Published 9:36 PM EDT, July 31, 2016

Share

WASHINGTON (AP) — Republican presidential candidate Donald Trump is suggesting the U.S. accept Russia’s annexation of Crimea if it would lead to better relations with Moscow and stronger cooperation in fighting Islamic State militants.



That view runs counter to the Obama administration, which imposed economic sanctions against Russia for annexing the territory in Ukraine two years ago. The United Nations also doesn’t want countries to recognize Crimea as part of Russia, and some top Republicans staunchly defend Crimea against what they consider Russian aggression.

in an interview broadcast Sunday on ABC’s “This Week,” Trump suggested that the people of Crimea would rather be part of Russia. Trump also said he wasn’t involved in the effort that softened support in the Republican Party platform on assisting Ukraine. Although the platform is not pro-Russia, Trump supporters succeeded in preventing a reference to arming Ukraine from being added.



On the topic of Putin and Ukraine, the Republican said: “He’s not going into Ukraine, OK, just so you understand. He’s not gonna go into Ukraine, all right? You can mark it down. You can put it down. You can take it anywhere you want.”


So b4 Trump is elected President, he is on record for being OK with Putin taking and keeping Crimea. Which was part of Ukraine and generally OK with the idea of Putin taking Ukraine because the citizens speak Russian. I don't wonder who he got that talking point from, but perhaps you do.

[Opti]

The events in Kyiv that ousted Ukrainian president Viktor Yanukovych on 22 February 2014 sparked pro-Russian demonstrations in Crimea against the incoming Ukrainian government. At the same time, Russian president Vladimir Putin discussed Ukrainian events with security chiefs, remarking that "we must start working on returning Crimea to Russia". On 27 February, Russian special forces without insignia[34] seized strategic sites across Crimea.[35][36] Although Russia at first denied its military involvement,[37] Putin later admitted that troops were deployed to "stand behind Crimea's self-defence forces".[38]


en.wikipedia.org/wiki/Annexation_of_Crimea_by_the_Russian_Federation

ETA- I don't want to put anymore of this into this thread, but this is at a minimum a three dimensional chess game that's been played since at least 1987. Think on Putin's excuse this time for invading Ukraine proper, rooting out Nazis. We know they aren't there but it was a great talking point to the Russian citizens. Now used by Russia and the corrupt GOP to pretend Trump is being persecuted. Trump is using the playbook of Mein Kampf. Pretending otherwise does not work for me.

[TheOtherMe]

Simple answer:  yes, it's a fool's dream

[minnesotapaintlady]

I'm also not understanding why you think you'll get taxed twice?  If you sell the stocks within your IRA and take out cash you will pay tax on the distribution.  If you transfer the stocks in kind you will also pay taxes on the distribution, but the basis on the stocks in the taxable account will be stepped up to what it was when the amount was transferred, so if you turned around and sold the stocks the same day you wouldn't pay any additional taxes on the gains you acquired while it was in the tax-deferred account.  Any gains going forward AFTER the transfer would be taxable though.

[soupandstew]

Jul 27, 2024 12:46:40 GMT -5 minnesotapaintlady said:

I'm also not understanding why you think you'll get taxed twice?  If you sell the stocks within your IRA and take out cash you will pay tax on the distribution.  If you transfer the stocks in kind you will also pay taxes on the distribution, but the basis on the stocks in the taxable account will be stepped up to what it was when the amount was transferred, so if you turned around and sold the stocks the same day you wouldn't pay any additional taxes on the gains you acquired while it was in the tax-deferred account.  Any gains going forward AFTER the transfer would be taxable though.

This is exactly what I've done with my Apple stock when I had to take an RMD.  

[Tennesseer]

Jul 26, 2024 22:53:35 GMT -5 ripvanwinkle said:

I soon have to take my RMD. I know nothing about tax laws. But I think I'm trying to do a 3 card Monte on the IRS. Here's my idea.

1. Transfer my traditional IRA RMD into another taxable stock account. Pay no tax up front since it is transferred into another taxable account.

2. Recharacterize the stocks when I move them into my Roth IRA and pay the tax then. The IRS gets its money and all is well with the world. Avoids paying taxes twice.

Is this a fools dream?

Ask your buddy donald trump how to cook your financial books. He's a pro at that.

[bookkeeper]

I have always figured that money that has been invested for 30 or 40 years has earned enough income to pay the tax bill that is due when you want to get it out.

[ripvanwinkle]

Jul 27, 2024 9:10:23 GMT -5 jerseygirl said:

Opti - Crimea was invaded during Obama presidency in 2014. Ukraine under Biden

What does Crimea have to do with my question?

[Opti]

Jul 27, 2024 18:44:16 GMT -5 Tennesseer said:

Jul 26, 2024 22:53:35 GMT -5 ripvanwinkle said:

I soon have to take my RMD. I know nothing about tax laws. But I think I'm trying to do a 3 card Monte on the IRS. Here's my idea.

1. Transfer my traditional IRA RMD into another taxable stock account. Pay no tax up front since it is transferred into another taxable account.

2. Recharacterize the stocks when I move them into my Roth IRA and pay the tax then. The IRS gets its money and all is well with the world. Avoids paying taxes twice.

Is this a fools dream?

Ask your buddy donald trump how to cook your financial books. He's a pro at that.

I'm thinking it might be the ads that run on RW websites and TV shows. They've probably told him the tax man is coming after his hard earned retirement money and ...

[jerseygirl]

Jul 28, 2024 22:32:18 GMT -5 ripvanwinkle said:

Jul 27, 2024 9:10:23 GMT -5 jerseygirl said:

Opti - Crimea was invaded during Obama presidency in 2014. Ukraine under Biden

What does Crimea have to do with my question?

Nothing I was responding to something incorrect from Opti
Sorry

[Opti]

Jul 29, 2024 7:52:53 GMT -5 jerseygirl said:

Jul 28, 2024 22:32:18 GMT -5 ripvanwinkle said:

What does Crimea have to do with my question?

Nothing I was responding to something incorrect from Opti
Sorry

Well Crimea was only important if Rip did not want to take responsibility for choosing a tax deferred IRA account.

While not appropriate here, sometimes when things happen globally has nothing to do with what or who started them. Crimea and Ukraine have been on Putin's list for decades to get back.

[TheOtherMe]

Those two countries have nothing to do with this topic.  

[ripvanwinkle]

Ok, after reading all your posts it appears the only avenue is SELL MY AAA RATED GOOD PERFORMING STOCKS that I've had for 20-30yrs to satisfy the RMD requirement. Grrr..That stinks!!! I can't transfer them or re-characterize them to my Roth IRA.

The money from the sale is taxable. I can only put up to $8000 in my Roth per year. Anything over that I get penalized. I've already maxed out my Roth IRA contribution for the year. 

So my only choice is to take the money and put it into my regular brokerage account. Then immediately buy back the same stocks on the same day. I think this would be a wash sale. Then transfer/re-characterize them into my Roth IRA and pay the tax again.

Does anybody have a better way?

 

[tallguy]

Sept 6, 2024 0:25:44 GMT -5 ripvanwinkle said:

Ok, after reading all your posts it appears the only avenue is SELL MY AAA RATED GOOD PERFORMING STOCKS that I've had for 20-30yrs to satisfy the RMD requirement. Grrr..That stinks!!! I can't transfer them or re-characterize them to my Roth IRA.

The money from the sale is taxable. I can only put up to $8000 in my Roth per year. Anything over that I get penalized. I've already maxed out my Roth IRA contribution for the year. 

So my only choice is to take the money and put it into my regular brokerage account. Then immediately buy back the same stocks on the same day. I think this would be a wash sale. Then transfer/re-characterize them into my Roth IRA and pay the tax again.

Does anybody have a better way?

 

What does this mean in your mind?  There is an annual limit on how much you can contribute to a Roth IRA, which you say you have already hit.  An RMD cannot be converted to Roth.  A further withdrawal AFTER taking the RMD can be converted however.  There is no way to transfer from a taxable account to a Roth that would not be a contribution, so that excess contribution would have to be returned to you.  There is a penalty if you do not have it returned by the deadline.  Recharacterization would not have any meaning here.  It is only to change a contribution from traditional to Roth or vice versa.  The short answer is that the government forces you to take the RMD.  Spend it, save it, invest in your taxable account, whatever.  But you do have to take it.  The benefit of putting it into a taxable account is that further gains are taxed at the capital gains rates, which could be zero if your income is low enough.

And technically, the money from the sale of equities in your Roth is not taxable.  The distribution is taxable.  That's different.

[TheOtherMe]

You are trying to cheat the tax code.  Your ideas to cheat won't work.

Pay your taxes.  

[minnesotapaintlady]

Sept 6, 2024 0:25:44 GMT -5 ripvanwinkle said:

Ok, after reading all your posts it appears the only avenue is SELL MY AAA RATED GOOD PERFORMING STOCKS that I've had for 20-30yrs to satisfy the RMD requirement. Grrr..That stinks!!! I can't transfer them or re-characterize them to my Roth IRA.

The money from the sale is taxable. I can only put up to $8000 in my Roth per year. Anything over that I get penalized. I've already maxed out my Roth IRA contribution for the year. 

So my only choice is to take the money and put it into my regular brokerage account. Then immediately buy back the same stocks on the same day. I think this would be a wash sale. Then transfer/re-characterize them into my Roth IRA and pay the tax again.

Does anybody have a better way?

 

Can you not just do an in kind transfer of the stocks from your IRA to your brokerage account?  You should not have to sell them first and the amount transferred out would go towards your RMD.

eta: and you cannot recharacterize money in your brokerage to your Roth IRA.

[MN-Investor]

Assume your RMD is $20,000. Also assume that you have Apple stock in your IRA for which you paid $8,000 and it's now worth $20,000. If your IRA company allows it, you can transfer the Apple stock to your brokerage account. If not, you can sell your Apple stock, take the $20,000 you receive, and transfer that to your brokerage account, then buy $20,000 worth of Apple stock.

The result is the SAME. You will a taxable RMD of $20,000. You can't avoid that. But you will have Apple stock in your brokerage account with a $20,000 basis.

A wash sale is not relevant to this conversation.

[ripvanwinkle]

Sept 6, 2024 12:05:20 GMT -5 minnesotapaintlady said:

Sept 6, 2024 0:25:44 GMT -5 ripvanwinkle said:

Ok, after reading all your posts it appears the only avenue is SELL MY AAA RATED GOOD PERFORMING STOCKS that I've had for 20-30yrs to satisfy the RMD requirement. Grrr..That stinks!!! I can't transfer them or re-characterize them to my Roth IRA.

The money from the sale is taxable. I can only put up to $8000 in my Roth per year. Anything over that I get penalized. I've already maxed out my Roth IRA contribution for the year. 

So my only choice is to take the money and put it into my regular brokerage account. Then immediately buy back the same stocks on the same day. I think this would be a wash sale. Then transfer/re-characterize them into my Roth IRA and pay the tax again.

Does anybody have a better way?

 

Can you not just do an in kind transfer of the stocks from your IRA to your brokerage account?  You should not have to sell them first and the amount transferred out would go towards your RMD.

eta: and you cannot recharacterize money in your brokerage to your Roth IRA.

Well I think I've got this now.

1. I have to sell my beautiful grade AAA stocks to meet my RMD. Cash. No way around it. No transfer to any account. I can put the money in my taxable brokerage account and buy back my good stocks. My new cost basis will be at the time I buy them.

2. After the RMD is met I can convert any amount stocks into my Roth IRA which does not affect the yearly contribution amount.

3. However, the amount I convert is considered income and will  be noted on my tax return when I file my taxes. The amount I convert is added to my gross income for that tax year. The higher the conversion amount, the more I'll owe in taxes.

I that about right??

[tallguy]

Sept 6, 2024 21:44:04 GMT -5 ripvanwinkle said:

Sept 6, 2024 12:05:20 GMT -5 minnesotapaintlady said:

Can you not just do an in kind transfer of the stocks from your IRA to your brokerage account?  You should not have to sell them first and the amount transferred out would go towards your RMD.

eta: and you cannot recharacterize money in your brokerage to your Roth IRA.

Well I think I've got this now.

1. I have to sell my beautiful grade AAA stocks to meet my RMD. Cash. No way around it. No transfer to any account. I can put the money in my taxable brokerage account and buy back my good stocks. My new cost basis will be at the time I buy them.

2. After the RMD is met I can convert any amount stocks into my Roth IRA which does not affect the yearly contribution amount.

3. However, the amount I convert is considered income and will  be noted on my tax return when I file my taxes. The amount I convert is added to my gross income for that tax year. The higher the conversion amount, the more I'll owe in taxes.

I that about right??

Yes.  As far as your taxes are concerned, both the RMD amount and any amount converted in addition will all show up as a distribution, and that distribution is taxable.