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Dividends in an IRA can be automatically reinvested or funneled to another investment vehicle such as a money market account.
All withdrawals from an IRA are subject to the same tax treatment regardless of how long you held the stock. The Capital Gains issue only arises in the case of taxable accounts.
Distributions from an IRA are subject to regular icome tax by both Federal and State. If you withdraw prior to age 59 1/2 the amount withdrawn is subject to regular income tax plus a 10% penalty.
So the issue is not how to avoid taxes but how to avoid the 10% penalty.
One way to do this is to begin taking equal periodic distributions using a formula that calculates your life expectancy. THese withdrawals must continue on an equal and periodic basis for at least 5 years or until you are 59 1/2.
There are 3 different IRS approved formulas you can use. Sorry, but I'm not sure of the details on them. Perhaps another Fool can help. Or you can go to the IRS web site at
Hope this helps.
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