I would be more than a little unwilling to rely on an article from 2000 for tax strategy. So, either check with your tax adviser or search for more recent guidance.
Here’s a more recent article on the topic of in-kind distributions as RMDs from the website affiliated with Ed Slott, the author of the CNN article:
https://www.irahelp.com/slottreport/taking-non-cash-required-distributions-your-ira
And here’s another by Christine Benz of Morningstar that contains discussion of the same topic:
If you have $10K in capital gains and $5K in capital losses, you will have net taxable capital gains of $5K (long term or short term depending on how long you held the stocks). If you have $10K in capital gains and $15K in capital losses, you will completely offset your current capital gains, and of the remaining $5K in losses, you can take $3K in the current year and carry forward $2K to be used in future years (either against future capital gains, or as a net loss, up to the $3K annual limit). If you withdraw funds from an IRA, it is ordinary income, whether the source of that withdrawal was selling stocks held in the IRA or from other income earned in your IRA.
If you have moved stocks from an IRA to a taxable account, you would have paid tax on the fair market value of the stock when it was withdrawn and transferred to a taxable account. Therefore, your basis in the stock is the now the fair market value that you reported tax on in the year of transfer. The only gain you would then have is any appreciation from the time of transfer to the taxable account to the time of sale.
That article is to determine what basis for cost when you transfer stocks from IRA for distribution. Because inside IRA there is no distinction for capital gain. Once you have the basis of the stock then you can properly account for gain or loss. Inside IRA account there is no such thing as gain or loss. I mean you can’t deduct loss.
Goldenwest, Thank you for answering the question I meant to ask! My brain isn’t all that reliable late at night.
I’m happy to hear that the basis resets. But we still lost out, I think, because the part of the market value, at the time of transfer, that came from capital gains was taxed at ordinary rates.
Thanks for the links, AttorneyMom and DrGoogle! I am off to read them.
Yes that’s how they get you. No free lunch! 