A. In theory, the RMD determination is quite simple - you divide the adjusted prior year-end value of the traditional IRA by a divisor obtained from the appropriate IRS table. Unfortunately, in reality, complications do exist. Below are a few common ones:
1. Unpaid bond interest
For accrued but unpaid bond interest, should you include in the account value or not? The answer is, even though the IRA provider's form 5498 (filed approximately May each calendar year for the prior year) may not include such value, you are advised to include it.
2. Hard to value assets
If your IRA account holds some hard-to-value assets, its valuation should be supported by regular appraisals.
3. Deferred annuity
If your IRA holds a deferred variable annuity contract, you can normally use its "cash value" as its value for RMD purposes; however, if the contract has a minimum death benefit guarantee in excess of that cash value, and the contract permits you to withdraw cash without reducing the death benefit, a different valuation rule may apply.
4. Rollover amount
If you have any rollover amount that was deposited in the account within 60 days after the beginning of the year that was "in transit" between IRAs on the year-end valuation date, you need to add back the value into the prior year-end value.
5. Roth conversion recharacterized
If you have any Roth conversion in the prior year that was "recharacterized" in the current year, you need to add it into the prior year-end value.
6. Account value drop
If your total account value dropped to below the amount of the RMD, your RMD is reduced to the now lower total account value.