Can you take an RMD in stock? (In‑Kind RMDs)

This article answers the question “can you take an RMD in stock” and explains in‑kind RMDs: how they work, which accounts allow them, tax and valuation rules, pros and cons, custodian consideration...

2026-01-11 08:08:00

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Can you take an RMD in stock? (In‑Kind RMDs)

Short description

Yes — the short answer to "can you take an RMD in stock" is yes: many retirement accounts (especially IRAs) permit required minimum distributions (RMDs) to be satisfied "in‑kind" by transferring securities (for example, shares of stock, ETFs, or mutual funds) into a taxable brokerage account instead of selling for cash. Availability depends on custodian and plan rules, and the fair market value (FMV) on the distribution date determines the taxable amount and the new cost basis.

Introduction

If you are asking "can you take an RMD in stock," this guide walks through what an in‑kind RMD is, which accounts and assets typically allow it, the IRS treatment, the step‑by‑step process, tax consequences, valuation and timing concerns, practical advantages and risks, custodian rules, reporting requirements, common errors to avoid, and illustrative examples. Readers will learn when an in‑kind RMD is useful and what alternatives exist. This article is educational and not tax advice — check with your plan administrator or a tax professional for personal circumstances.

H2: Definition and overview

What is an RMD?

A required minimum distribution (RMD) is the minimum amount the IRS requires certain retirement account owners to withdraw each year once they reach the required beginning age (rules vary by account type and year). RMDs apply to traditional IRAs and many employer retirement plans. The RMD amount is calculated using account balance(s) and life expectancy tables.

What does an "in‑kind" distribution mean?

An in‑kind distribution means the actual asset is transferred out of the retirement account instead of being sold for cash. For example, if your RMD equals $10,000 and you hold 100 shares of a stock worth $100 per share inside your IRA, you can instruct the custodian to transfer 100 shares to your taxable brokerage account. The FMV of those shares on the date of distribution — $10,000 in the example — is the amount treated as the distribution for tax purposes.

Key points:

"In‑kind" = transfer of the asset itself (stock, ETF, mutual fund) rather than liquidation to cash.
The FMV at distribution date is used both to determine whether the RMD was satisfied and the taxable amount to report.
Custodians and plan rules control whether in‑kind RMDs are permitted and the procedures to follow.

H2: Legal and regulatory basis

IRS treatment

The IRS permits distributions in kind. When an in‑kind distribution is made, the FMV of the asset on the date of distribution is included in gross income as an ordinary distribution amount (unless another exception applies). The RMD calculation itself generally uses the prior‑year account balance (as of December 31) divided by a life expectancy factor; the in‑kind transfer must satisfy at least the required dollar amount for the RMD in the year to avoid penalties.

Penalty for failing to take full RMD

If you fail to take the full required distribution, the shortfall may be subject to an excise tax (historically 50% of the shortfall, though legislative changes and relief provisions may alter rates and enforcement — confirm current IRS guidance). That underscores the importance of ensuring the FMV of any transferred shares meets or exceeds the RMD dollar requirement.

H2: Which accounts and assets allow in‑kind RMDs

Accounts that commonly allow in‑kind RMDs

IRAs (traditional IRAs and some SEP/SIMPLE IRAs) commonly permit in‑kind distributions; many custodians provide established procedures for transferring shares to a taxable account.
Employer plans (401(k), 403(b), governmental plans) vary: some plans allow in‑kind distributions while others require cash distributions or internal conversion steps. The plan document and administrator determine whether in‑kind RMDs are available.

Assets that are typically transferable in‑kind

Publicly traded stocks: commonly transferable in‑kind between accounts at the same or different custodians.
ETFs: generally transferable in‑kind like stocks.
Many mutual funds: some mutual funds can be transferred in‑kind, but operational details (share classes, fund family restrictions) matter.
Bonds and other marketable securities: often transferable, subject to custodian rules.

Assets that are typically difficult or not transferable in‑kind

Privately held stock or non‑public interests: often illiquid and not accepted for in‑kind transfers to taxable brokerage accounts.
Real property, partnership interests, and certain alternative investments: these are frequently subject to plan or custodian restrictions and may require liquidation to cash before distribution.

H2: How an in‑kind RMD works (process)

Step‑by‑step process

Calculate the RMD amount: use the applicable life expectancy table and the prior‑year December 31 account balance or follow plan‑specific calculation rules.
Determine which asset(s) to transfer: select shares (or fractional shares) whose FMV on the distribution date equals the RMD amount.
Coordinate with the custodian: submit an in‑kind distribution request and provide any required paperwork. Confirm whether a taxable account already exists and whether transfers must be made to an account at the same custodian.
Execute the transfer on the distribution date: the custodian records the distribution and the FMV on that date becomes the taxable amount.
Pay income taxes: the distribution amount (FMV) is ordinary income for the year; ensure you have outside cash to pay taxes, or plan for estimated tax payments or withholding if allowed.
Recordkeeping and reporting: retain documentation of the FMV, the transfer confirmation, and Form 1099‑R issued by the custodian (which reports the distribution amount).

Operational notes:

Many custodians require that the taxable brokerage account already be open and able to accept the transferred securities.
If the transfer is across custodians (i.e., different firms), additional transfer processes (ACAT, proprietary transfer) may add time and potential price movement.
Some custodians will transfer fractional shares as cash; confirm whether partial shares are supported.

H3: Valuation and timing issues

Valuation rules

The FMV used for tax reporting is the value of the security on the date of distribution. If the transferred asset is a security with a market price, the closing price on the distribution date (or another reasonable market price) is commonly used.

Timing and price movement risks

Market prices can change between the RMD calculation/transfer instruction and the actual posting date. If prices fall after the transfer is initiated, the FMV at the actual distribution date may be less than the intended RMD amount, creating a shortfall.
To avoid shortfalls, many taxpayers choose to transfer a small cushion of additional shares or combine in‑kind transfers with a cash distribution to ensure the RMD dollar amount is met.

Confirming the transferred value

Always confirm the custodian's valuation method and the timestamp used to determine FMV. Keep the custodian confirmation showing the FMV on the distribution date as proof the RMD was satisfied.

H2: Tax consequences

Ordinary income treatment

The FMV of the transferred securities on the distribution date is treated as an ordinary distribution and included in your taxable income for the year (unless another exclusion applies). This is the same treatment as if the custodian had sold the securities and distributed cash.

Cost basis and holding period after transfer

The transferred shares receive a cost basis equal to the FMV on the distribution date. The holding period for capital gains purposes begins on the distribution date — i.e., any appreciation after the distribution is subject to capital gains tax when sold, with long‑term treatment only after the holding period exceeds one year from the distribution date.

Example of tax reporting flow:

Custodian issues Form 1099‑R reporting the distribution amount (FMV) as taxable income.
Later, when you sell the transferred shares in your taxable account, the sale is reported on Form 1099‑B; the cost basis used for gain/loss calculations should match the FMV reported as the distribution.

H3: Basis and holding period implications

Why basis resets matter

Appreciations that occurred while the asset was inside the retirement account were sheltered from taxes; when the asset is moved out as an in‑kind RMD, those pre‑distribution gains are not taxed as capital gains — instead, the FMV at distribution is taxed as ordinary income.
Future appreciation after the distribution is taxed as capital gain or loss measured from the FMV basis. This can be advantageous if you expect the asset to appreciate and you prefer capital gains treatment (often taxed at lower rates) rather than immediate ordinary income recognition on future appreciation.

Holding period timing

Since the post‑distribution holding period begins on the distribution date, you must hold for more than one year after that date to qualify for long‑term capital gains rates on future appreciation.

H2: Practical advantages

Reasons to consider an in‑kind RMD

Avoid selling at depressed prices: if you hold an asset that you believe has long‑term value but the market is temporarily down, transferring in kind avoids triggering a sale at a low price.
Maintain market exposure: you retain the investment position without being forced to liquidate inside the retirement account.
Potential tax timing benefit: future appreciation after distribution can be taxed at capital gains rates instead of ordinary income (assuming long‑term holding after the distribution date).
Reduce slippage and transaction timing: transferring shares in kind can avoid execution lag or market impact from a sale within the IRA.
Estate and gifting considerations: once in your taxable account, you can use standard taxable‑account strategies (e.g., gifting shares to family or donating appreciated shares under different rules than qualified charitable distributions).

H2: Practical disadvantages and risks

Drawbacks and potential pitfalls

Tax still owed now: the FMV on distribution date is taxed as ordinary income. You must pay the tax using outside funds (not from the IRA distribution itself unless the custodian allows withholding, which may reduce the distribution below the RMD amount).
Administrative hurdles and plan refusals: some custodians or employer plans may not permit in‑kind distributions or may impose paperwork, timing windows, or fees.
Basis reset and holding period: while future appreciation may receive capital gains treatment, the basis reset means you cannot claim pre‑distribution gain basis — the FMV becomes your cost basis.
Tracking complexity: ensuring basis is correctly reported and carried forward to future 1099‑B reporting requires careful recordkeeping.
Risk of under‑distribution: price movements during transfer may leave you short of the required RMD amount, exposing you to excise taxes.
Illiquid assets: assets that are hard to transfer or value (private investments, closely held stock) may not be practical to distribute in kind.

H2: Custodian and plan considerations

Custodian procedures and requirements

Each IRA custodian sets rules and forms for in‑kind distributions. Common requirements include: having a taxable account established to receive the transfer, signed distribution forms, and instructions on which securities and how many shares to transfer.
Some custodians will only transfer to a taxable account at the same firm; others allow transfers to outside brokerages but may require in‑transfer processes that take additional time.
Fees: custodians may charge transfer or processing fees. Confirm fee schedules before initiating the transfer.

Employer plan limitations

Many employer plans have plan‑specific provisions. Some 401(k) plans permit in‑kind distributions for retirees who have separated from service; others require distributions in cash, or they convert assets to cash or plan‑approved investments before distribution.
Always check the plan document and speak with the plan administrator to confirm whether an in‑kind RMD is available and the steps to request it.

Required paperwork and account matching

You may need to open a taxable brokerage account in advance and provide account details to the custodian. To avoid delays, confirm whether the receiving account must be at the same custodian and whether they accept partial share transfers or require rounding to whole shares.

H2: Reporting and recordkeeping

What the custodian reports

Form 1099‑R: the custodian reports the distribution amount (the FMV) on Form 1099‑R for the tax year in which the distribution occurred. This amount is included in gross income unless an exception applies.
Form 1099‑B: when the transferred shares are later sold in the taxable account, the sale will be reported on Form 1099‑B. If the custodian that receives the asset also tracks basis and receives cost‑basis information, the 1099‑B may show the correct basis (FMV at distribution). If basis is not reported by the custodian, you must keep proof of FMV to support your tax return.

Documentation to retain

Distribution confirmation showing the security, number of shares, and FMV on the distribution date.
Copy of Form 1099‑R received from the retirement account custodian.
Records of subsequent sales and Forms 1099‑B showing proceeds and basis.
Notes or correspondence showing custodian instructions or plan administrator confirmations about the in‑kind transfer.

H2: Common pitfalls and compliance

Frequent mistakes to avoid

Failing to meet the full RMD amount: ensure the FMV of transferred shares equals or exceeds the required RMD dollar amount. If not, complete the shortfall with cash or additional transfers.
Using IRA funds to pay tax: paying income taxes by taking additional IRA distributions may increase taxable income and reduce retirement savings; taxes should ideally be paid from outside funds when possible.
Misunderstanding plan limitations: assuming employer plans allow in‑kind distributions when they do not.
Not documenting FMV properly: lacking proof of valuation at the distribution date can complicate audits or basis reconciliation.
Selling immediately without tracking basis: if you sell the transferred shares shortly after transfer, be sure to apply the correct cost basis (FMV at distribution) to compute gain or loss correctly.

H2: Examples

Numeric example — in‑kind RMD transfer

Situation: On December 31 of Year 0, your traditional IRA has a balance of $500,000. Your distribution factor yields an RMD of $20,000 for Year 1.
Asset: You hold 200 shares of XYZ stock inside the IRA. On the RMD distribution date (Date D), XYZ closes at $101 per share; the FMV of 200 shares is $20,200.
Action: You instruct the custodian to transfer 197.5 shares (or 198 shares depending on fractional share rules) so that the FMV on Date D meets or exceeds $20,000. The custodian transfers shares to your taxable brokerage account and records the distribution.
Tax consequence: The custodian issues Form 1099‑R reporting $20,200 as the distribution amount (or $20,000 if rounding is used and the custodian confirms). You include the FMV amount as ordinary income on your tax return for Year 1. You pay income tax on $20,200 using outside funds or through withholding if arranged.
Basis and future sale: Your cost basis in the transferred XYZ shares is $101 per share (the FMV on Date D). If you later sell shares at $150 per share after holding them more than a year, the $49 per share gain is taxed as long‑term capital gain; appreciation that occurred while the asset was inside the IRA is not taxed as capital gain — instead, the FMV at distribution was taxed as ordinary income.

Example of combining in‑kind with cash

If exact share counts cannot match the RMD precisely because of whole‑share constraints, you might transfer as many shares as possible and take a small cash distribution for the remainder. For example, transfer 198 shares valued at $19,998 and take $2 cash to meet the $20,000 RMD.

H2: When an in‑kind RMD is a good idea

Situations that commonly justify in‑kind distributions

Market downturns: you wish to avoid selling holdings at temporarily depressed prices and prefer to keep exposure while satisfying the RMD.
Strong conviction in a security: you want to maintain your position in a security you expect to appreciate and prefer capital gains tax treatment on future appreciation.
No immediate cash need: you don't need the RMD proceeds for living expenses and prefer to hold investments in a taxable account.
Tax planning advantage: you expect your ordinary income tax rate in the distribution year to be favorable relative to potential future capital gains tax timing.

H2: Alternatives and related strategies

Other ways to satisfy or manage RMDs

Take cash RMDs: sell assets inside the retirement account and receive cash — straightforward but may realize a sale at inopportune prices.
Keep a cash reserve in the IRA: hold some cash inside the retirement account to cover RMDs so you are not forced to sell investments at bad times.
Qualified Charitable Distribution (QCD): if eligible, you may direct up to the annual QCD limit (check current rules) from your IRA directly to a qualified charity; QCDs can satisfy RMDs and are excluded from taxable income, subject to QCD rules.
Roth conversion: convert amounts to a Roth (paying tax now) and potentially reduce future RMD obligations (rules vary and conversions themselves generate taxable income).
Partial in‑kind plus cash: transfer a portion in kind and take cash for the remainder to meet the RMD exactly.

H2: Frequently asked questions (FAQ)

Q: Can you sell the shares immediately after an in‑kind RMD?

A: Yes. After the shares are transferred into your taxable account, you may sell them. The cost basis for the sale is the FMV on the distribution date (the amount reported as the distribution). The holding period for capital gains starts on the distribution date.

Q: Will an in‑kind RMD reduce my taxes compared with taking cash?

A: An in‑kind RMD does not lower the RMD taxable amount — the FMV on the distribution date is taxed as ordinary income just as if you sold the security inside the IRA. The potential tax difference arises later: future appreciation after the distribution may be taxed as capital gains instead of ordinary income.

Q: Do employer plans allow this?

A: Sometimes. Employer plan rules differ. Check the plan document and speak with the plan administrator to confirm whether an in‑kind distribution is permitted for RMDs.

Q: Do I need a matching taxable account at the same custodian?

A: Many custodians require that a taxable brokerage account be established and ready to receive transferred securities. Some custodians will only transfer to an account at the same firm; others permit transfers to outside brokerages through standard transfer processes. Confirm with your custodian.

H2: Custodial guidance and current reporting (news context)

截至 2025-12-31，据 Charles Schwab 报道，many custodians continue to support in‑kind RMDs for IRAs but emphasize that plan documents and operational processes vary between firms.
截至 2025-12-31，据 Fidelity Investments 报道，investor inquiries regarding in‑kind RMDs spike during volatile markets when holders prefer to avoid inside‑account liquidation.

(Readers should verify the date and text of custodian policy updates directly with the custodian or plan administrator — this article summarizes common practice and is not a substitute for custodian rules or tax advice.)

H2: References and further reading

This article summarizes common industry guidance and custodian materials. See also the custodial and industry sources (selected):

Greenleaf Trust — guidance on in‑kind RMDs
TurboTax community discussions on RMD forms and in‑kind transfers
Morningstar commentary on whether to take RMDs in kind
InvestmentNews coverage of RMDs in the form of stock
J.K. Lasser Q&A on transfers of stock from retirement accounts
Charles Schwab — custodian guidance on taking in‑kind IRA distributions
Fidelity Investments — resources on RMD options and execution

Note: This article is informational and not tax or legal advice. Consult a tax professional and your plan/custodian for actions tailored to your situation.