IRA Basis for calculating delayed RMD

[OxLobber]

My wife will reach age 70.5 in 2018.   If her initial RMD is deferred until 2019, is its basis the 12/31/17 account value or the 12/31/18 amount?  (She will be converting a portion to a Roth in 2018 so the 12/31/18 value will be less.)

Question 2: When a dividend is declared in December and not paid until January, it does not appear in the year end account valuation.  Must it be included when calculating the basis for RMD?

Thanks,

Michael

[txdd]

The 2018 RMD is based on the 12/31/17 value. Although the first RMD can be deferred into 2019, she can't convert anything to Roth before taking the 2018 RMD. In other words, the first RMD must be withdrawn BEFORE a Roth conversion in 2018.

Q2: Her custodian should send her a form showing the year-end value. Use that number to figure the RMD.

[OxLobber]

txdd,

Thanks for the response.  I have been thinking about your statement, "...she can't convert anything to Roth before taking the 2018 RMD."  Are you speaking in terms of reporting or chronological timing?

If she converts in January and takes her full IRA RMD later in the year (turning 70 1/2 at the end of June) is that OK?

If the requirement is that she must take the RMD before the conversion (chronologically), must the RMD from her 401k also occur first?

Gratefully,

Michael

[txdd]

Yes, it's chronological. The RMD from her traditional IRA(s) (all added together if she has more than one) must be taken before any other withdrawals, including Roth conversions, from any IRA. 401k's are treated separately so any extra IRA withdrawals can occur before taking her 401k RMD. 

[OxLobber]

Thanks, txdd.

One last question: my wife turned 70 on 12/31/17 and will obviously become 70 1/2 on 6/30/18.  She will begin taking RMD in 2018 and will make a Roth conversion after the first RMD is taken.  May she now make a deductible spousal contribution to her IRA for 2017 before we file our 2017 return? (I work, am not covered by a qualified plan, and have sufficient income to otherwise allow the contribution).  I realize that the deductible contribution would need to be considered as part of the basis when calculating her RMD.

Grateful for your help,

Michael

[txdd]

Based on your stated caveats, she would be able to make a deductible contribution before 4/15/18 for 2017. However, that contribution does not affect her 2018 RMD. Use the actual account balance on 12/31/17 to calculate.