The purchase of a collectible by a retirement account, including a 401(k), Roth or IRA account, is treated as a distribution, which could be taxable income for the account owner.
The IRS has posted Frequently Asked Questions relating to CARES Act Retirement Plan Provisions.
According to Q & A 7, a taxpayer who elects to repay a COVID-19 related distribution would pay the tax on the three-year schedule and then amend the tax returns and request refunds when the distribution is repaid.
According to Q & A 9, employers may optionally amend their retirement plans to permit loans and distributions permitted under the CARES Act, so some employers might not allow the increased loans and distributions.
Here is a URL for the FAQs. https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers
(Note – The IRS issued final regulations superceding the proposed regulations discussed below. The effective date was changed to required minimum distributions for years beginning on or after January 1, 2022 and the new life expectancy tables changed slightly. See TD 9930.)
The IRS has issued proposed regulations relating to required minimum distributions from retirement accounts, including, 401(k), IRA and Roth IRA accounts. (Proposed Regulations REG-132210-18, Proposed Regulations Section 1.401(a)(9)-9.)
The required minimum distribution is generally computed using a life expectancy table issued by the IRS, called the lifetime distribution table. The life expectancy tables haven’t been updated for many years. The proposed regulations include new life expectancy tables.
(If a taxpayer fails to take a required minimum distribution, the federal penalty is 50% of the undistributed amount.)
Since life expectancies have been increasing, required minimum distributions will be smaller using the proposed tables, potentially leaving larger balances to accumulate future earnings. Bigger distributions can optionally be taken at the risk of exhausting the account before the employee or plan owner’s death.
The proposed regulations are proposed to be effective for retirement plan distributions for tax years beginning on or after January 1, 2021, provided they are adopted as final regulations by that date.
Required minimum distributions for a non-spouse beneficiary of a deceased employee or a deceased plan owner are based on the life expectancy determined using the Single Life Table of the beneficiary as of the date of death of the employee or plan owner, minus one for each subsequent year. Under the proposed regulations, the beneficiary will be able to recompute his or her life expectancy as of the date of death of the employee or deceased plan owner using the new lifetime distribution table starting January 1, 2021.
The interview on Financial Insider Weekly to be broadcast in San Jose and Campbell on Fridays, June 2 and 9 is with Michael Jones, CPA of Thompson Jones LLP. Our interview subject is “Beneficiary designations for retirement accounts.” The interview will be broadcast at 9:30 p.m. Pacific Time on CreaTV, Comcast Channel 15 in San Jose and Campbell, and will be broadcast as streaming video at the same time at www.creatvsj.org. You can find broadcast times for other San Francisco Bay Area cities and past episodes at www.financialinsiderweekly.com.
The interview on Financial Insider Weekly for this week is with Bill Neville, Certified IRA Services Professional of The Entrust Group. Our interview subject is "Making alternative investments with your IRA or Roth account."
The interview on Financial Insider Weekly for this week is with Bill Neville, Certified IRA Services Professional of The Entrust Group. Our interview subject is "Making real estate investments with your IRA or Roth account."
This week’s interview on Financial Insider Weekly is with Tom W. Anderson, President of the Retirement Industry Trust Association. Our interview subject is "Making alternative investments besides real estate using a Roth or IRA account."
This week’s interview on Financial Insider Weekly is with Tom W. Anderson, President of the Retirement Industry Trust Association. Our interview subject is "Investing in real estate using a Roth or IRA account."
This week’s interview on Financial Insider Weekly is with Michael Jones, CPA of Thompson Jones LLP. Our interview subject is "Community property issues for retirement accounts."
Optionally for 2014 and required thereafter, the IRA (including Roth IRA) custodian should report the fair market value of the assets held in the account as of December 31 of the year.