When my RMD is greater than my remaining basis in my traditional IRA, why isn’t my basis “zeroed out” instead of showing only a small reduction from some calculation?

Forum|Forum|7 years ago
June 1, 2019
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Best answer by re2boys

You don't receive your basis back immediately.

For example, if your withdrawal was 4% of the total value of all your traditional IRAs (as of end of previous year), then you got back 4% of your basis. The basis returned (not taxable) is spread out over the entire amount of the IRA. Only way to get back 100% of basis is to withdraw 100% of your traditional IRAs. For this computation, all your traditional IRA accounts is considered one personal IRA.

R

re2boysAnswer

Employee

You don't receive your basis back immediately.

For example, if your withdrawal was 4% of the total value of all your traditional IRAs (as of end of previous year), then you got back 4% of your basis. The basis returned (not taxable) is spread out over the entire amount of the IRA. Only way to get back 100% of basis is to withdraw 100% of your traditional IRAs. For this computation, all your traditional IRA accounts is considered one personal IRA.

fanfare

Employee

Not quite. If your BASIS is 4% of the value of your IRAs (after adding back that distribution) then 4% of your distribution is not taxed (and becomes the basis reduction).