Tax treatment of gain/loss & expenses on distribution from SDIRA

[Stephen Huff]

Rather than going through the RMD process, I'm considering just taking a full distribution of several properties I have in an SDIRA. How do I treat the long-term capital gain (or loss?) on my tax return? On a 1099-R, Box 1 for "Gross distribution" is basically "income" on Line 15a of the 1040, right? Is that number based on the current appraisal? Any way to reduce the distribution amount to account for repairs and property taxes over the years? Who determines the Box 2a "Taxable amount"? Thanks!

[Dmitriy Fomichenko]

Stephen,

past income/expenses for the property you are distributing from an IRA will have no affect on what you are trying to do. Like I said, you must have current appraisal that is as close as possible to the distribution date. The IRA custodian will use the appraised value of the property and will report that to you on form 1099-R. You will have to declare that amount on your current year tax return and pay ordinary income tax on it. That's it. All income that property had generated in the past stays in the IRA, tax deferred. If you are pulling out cash in addition to distributing the property - you will have to pay ordinary income tax on those amounts as well.

Now that it becomes your personal property and if you use is as a rental - you will be able to claim all expenses plus depreciation on your tax return, but you can't go back and claim expenses while the property was in an IRA on your personal tax return.

And yes, it is best to use guidance of an experienced CPA, get a tax professional who specializes in real estate on your team.