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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121585  
Subject: Re: Excess IRA distributions Date: 6/30/1997 12:38 PM
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<<1.) Can I take lump sums out of an IRA, at irregular intervals after I am 59 1/2 and before the year I become 70 1/2 and pay only the regular income tax due, or must I start a regular payout plan when I take out the first distribution. I think I need take a regular payout, or lump sum, only in the year I become 70 1/2, right?>>

Right. Between 59 1/2 and 70 1/2 you can take distributions as you wish. In any amount. At any time. They will be subject to regular taxation, but will not be subject to any penalties. Once you reach age 70 1/2, you MUST take annual MINIMUM distributions. You can certainly take more than the minimum, but your legal requirement is to take the minimum, based upon IRS tables.

<<2.) Can I take a stock certificate out instead of cash?
I assume I would get a 1099R form with the cash value of the stock in due time, on which I would pay the regular income tax. I would prefer to move the (implied) certificates to my margin account, rather than enduring 2 commissions and a bid-ask price spread.>>

Check with your brokerage firm. I don't believe that any of the firms will allow you to take distributions in the form of securities out of the IRA, but I also believe that this is a broker decision.

<<3.) If the answer to 2. is YES, is that (the amount on the 1099R) the cost-basis of the stock to be used for tax purposes should I later sell the stock? I hope it is not the original cost-basis, since tax would already have been paid when I withdrew it from the IRA.>>

If you find that the answer to #2 IS yes, then the broker will have to "price" the securities at the date of the distribution. The 1099 form that you receive will reflect that price, hence the FMV, hence the amount of the distribution, hence the amount that will be subject to taxation. This amount will also be your basis in the shares that you would then have in your posession.

UNLESS you have basis in your IRA already (by virture of non-deductible contributions made in prior years). This will complicate the picture a bit.

But I really think that you'll find that the brokers really don't want to distribute securities. The bookkeeping can be a pain, and there is possiblity of liability exposure if the stock takes a dump from the time that they "price" it to the time that you actually receive it.

So I'll be interested to know if your broker will allow you to take the securities. Call 'em and find out. Again, I don't THINK that there is an IRS rule prohibiting the distribution of stock from an IRA, and a quick search of my reference material can't locate anything specific.

Please find out what you can from your IRA broker and let me know.

TMF Taxes
Roy Lewis
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