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The IRS can’t make up its mind about RMDs on inherited IRAs

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  • #16
    Originally posted by jz- View Post
    Assuming you reinvest in tax-efficient ETFs, (VTI) now, 2022, is a great time to draw out assets to the top of your 24% bracket.

    Is it allowable to do a Roth conversion on your inherited-IRA?
    No, unless you're a spouse.

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    • #17
      Originally posted by Lithium View Post

      Does it have to be an entire IRA though? Even if it’s just a smaller fraction, it still creates a problem.

      FWIW I don’t have a sdIRA.
      Why? Why can't you make your RMDs from the portion that is not illiquid? I mean, they start out at about 4% a year. So if you leave 50% in liquid assets, that should cover RMDs for many years before the asset has to be sold. Plus the asset is probably kicking off income that can help cover them.

      The only issue that might be tricky is coming up with the value of the asset in the IRA so you can actually calculate the RMD. Annual appraisals can add up.
      Helping those who wear the white coat get a fair shake on Wall Street since 2011

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      • #18
        Originally posted by The White Coat Investor View Post

        Why? Why can't you make your RMDs from the portion that is not illiquid? I mean, they start out at about 4% a year. So if you leave 50% in liquid assets, that should cover RMDs for many years before the asset has to be sold. Plus the asset is probably kicking off income that can help cover them.

        The only issue that might be tricky is coming up with the value of the asset in the IRA so you can actually calculate the RMD. Annual appraisals can add up.
        This was the point I was getting at. Determining the denominator for the RMD calculation. I guess annual appraisals are hard for the IRS to take issue with. I'm not sure how syndications and funds get valued before they go full cycle.

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        • #19
          Originally posted by Lithium View Post

          This was the point I was getting at. Determining the denominator for the RMD calculation. I guess annual appraisals are hard for the IRS to take issue with. I'm not sure how syndications and funds get valued before they go full cycle.
          The syndication I run does annual appraisals, but I don't think any of the partners own it in an IRA. We just provide annual liquidity.

          Many funds do have a current NAV, particularly evergreen funds. But you're right that it would be an issue. Just use best guess I suppose.
          Helping those who wear the white coat get a fair shake on Wall Street since 2011

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