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Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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I need to liquidate or borrow against my inherited IRA due

Resolved Question:

I need to liquidate or borrow against my inherited IRA due to a financial set back in the last year. Can this be done without the 10% fee? I have about $170K in the account. Thanks, GSM
Submitted: 8 years ago.
Category: Tax
Expert:  Lev replied 8 years ago.

You may not borrow from your IRA.

The money you will take from the IRA will be deemed distribution - and will be added to your other taxable income.


However - such distribution from inherited IRA will not be subject of 10% penalty.

The distribution will reported on the form 1099-R - - in the box 7 - there should be reported a distribution code 4 - means - the distribution if due to death of the original owner. - please confirm that with the administrator of your IRA.


It is not recommended to take a large distribution during any single tax year because the distributed amount will be added to your other taxable income - and might push you into higher tax bracket. It better to spread the distribution over several years.


Let me know if you need help to estimate your tax liability.


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