Land held in an IRA - Spidell

Land held in an IRA

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Message Board Land held in an IRA

This topic contains 1 reply, has 2 voices, and was last updated by Larry Pon 2 weeks, 4 days ago.

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  • #183561
    KAREN BENNETT
    Participant

    My client has an inherited IRA from his father, the IRA had land held in it. My client received a 1099-R from this property changing names to both heirs of the IRA, they both also received another 1099-R that was the value of the balance in the IRA. This 1099-R state code K4 and they had property appraised by a certified appraiser the 2-1099-R’s and the fmv of property are equal.

    My question is on the 1099-R (2018) it state’s that the 1/2 of FMV is a taxable amount with unknown FMV of this 1099-R but the gross and taxable amount are the same, so is my client being taxed on this box 2 amount even though the property has not been sold as of 2019?

    FMV $198,000. on land total by an appraiser

    1099-R box 1 & 2 show $99,000

    Thanks for your help

    Karen Bennett

    kbbkkp@cox.net

  • #183585
    Larry Pon
    Participant

    Did your client set up an Inherited IRA to continue to hold this land?   Holding land in an IRA is tricky because the land has to be valued annually and RMDs will be required.   How do you pay out RMDs with land?

    It sounds like the land has been retitled to your client?   So your client now owns the land directly.   This means the cost basis of that land is now $99,000.   If this is the case, your client would pay tax on this $99,000 distribution.  There is no 10% penalty, just the tax.

    Take a look at the deed on the land.

    You may need help from an attorney who specializes in trusteed IRAs.   This is a very complex area.