required minimum distributions on employer stock

[Guest ladycpa]

I have a client that has a very low basis in his employer stock in his qualified plan. He turns 70 1/2 this year and has not taken any prior distributions. The RMD that has been computed is greater than the amount of his basis in the employer stock. He is contemplating taking a lump sum distribution that would enable him to take advantage of the special tax rules on NUA and simply pay tax on the basis. If the RMD is greater than the taxable distribution(Basis), does he have to take an additional RMD for the difference?

[mbozek]

In order to elect LT capital gains on the stock the participant is required to take a distribution of the balance of the credit to his account, e.g., a lump sum. A lump sum distribution at age 70 1/2 meets the requirements for a RMD because the entire amount has been distributed to the participant. There is no separate RMD for any payment of basis. See IRC 401(a)(9)(A)(i).