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QUALIFIED CHARITABLE DISTRIBUTIONS AND THE 10-YEAR RULE: TODAY’S SLOTT REPORT MAILBAG

Sarah Brenner, JD
Director of Retirement Education

Question:

Ed,

I recently saw an email from you on QCDs when deductible IRA contributions are made in the same year. It discussed how these two transactions interact with each other.

I am also wondering if the offset to the QCD would also occur for a SEP IRA or SIMPLE IRA contribution?

Thank you for your help.

Doug

Answer:

Hi Doug,

There are some complicated rules that apply when an individual makes deductible IRA contributions and does qualified charitable distributions (QCDs). The bottom line is that this should be avoided because it can result in part or all of a QCD being considered taxable.

It is a different story, however, when it comes to QCDs and a SEP or SIMPLE contribution. Making a SEP or SIMPLE IRA contribution will not impact the tax advantage of the QCD.

Question:

We are reading several interpretations of the new 10-year rule for designated beneficiaries for inherited IRAs. Does the 10-year rule begin in the year following the original account owner’s death? For example, if the account owner dies in 2020, the clock begins in 2021, and the account must be fully liquidated by the end of 2030?

Thanks for your assistance!

Jesse

Answer:

Hi Jesse,

You are correct. The funds will need to be distributed by December 31 of the tenth year following the year of death. If the IRA owner dies 2020, the account would need to be emptied by December 31, 2030.

https://www.irahelp.com/slottreport/qualified-charitable-distributions-and-10-year-rule-todays-slott-report-mailbag

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