Required Minimum Distribution With Illiquid IRA Assets (2026)

The rule, from the Code and the regulation

The duty to take money out of a traditional IRA starts in 26 U.S.C. 408(a)(6), which says that “rules similar to the rules of section 401(a)(9)” apply to IRAs. The regulation that does the work is 26 CFR 1.408-8, rewritten by T.D. 10001 (89 FR 58948, July 19, 2024) and applicable to calendar years from January 1, 2025. Nothing in either text turns on whether the account's assets are liquid (our reading). The rules that matter for an illiquid holding:

Source: 26 U.S.C. 401 and 408 (U.S. Code 2024 edition, govinfo.gov); 26 CFR 1.408-8 and 1.401(a)(9)-2 (eCFR, current to October 6, 2026); Federal Register document 2024-14543; IRS Publication 590-B (2025).

The penalty is in 26 U.S.C. 4974(a): if the amount distributed is less than the RMD, “there is hereby imposed a tax equal to 25 percent of the amount by which such minimum required distribution exceeds the actual amount distributed during the taxable year.” SECURE 2.0 (Pub. L. 117-328, section 302) replaced “50 percent” with 25 for taxable years beginning after December 29, 2022, and added section 4974(e): the rate becomes 10 percent if, during the correction window, you take the missed amount from the same plan and file a return reflecting the tax. The window closes at the earliest of a notice of deficiency, assessment, or “the last day of the second taxable year that begins after the end of the taxable year in which the tax” is imposed (4974(e)(2)). Section 4974(d) adds a waiver when the shortfall “was due to reasonable error” and “reasonable steps are being taken to remedy the shortfall”; the Form 5329 instructions say to enter “RC” and the amount next to line 54a or 54b.

Illiquidity is not on any list of exceptions. The one exemption Publication 590-B names for an IRA that cannot pay out covers a contract with an insurance company in state insurer delinquency proceedings, under Rev. Proc. 92-10. A non-traded REIT or a gated fund is not an insurance contract (our reading).

The December 31 number: who values an asset with no price

For a brokerage IRA the December 31 value is a closing price. For a self-directed IRA holding a rental, an LLC or a private fund, it is whatever the custodian reports, and the IRS puts the duty on the custodian. The 2026 Instructions for Forms 1099-R and 5498 say in box 5 to enter “the FMV of the account on December 31, 2026” and add: “Trustees and custodians are responsible for ensuring that all IRA assets (including those not traded on established markets or not having a readily determinable market value) are valued annually at their FMV.”

Source: IRS, Instructions for Forms 1099-R and 5498 (2026).

How often the value is missing or wrong: the GAO reported that for tax year 2016 an IRS team found “about 2 million” IRAs with hard-to-value assets, but custodians reported a dollar value for only 1.6 million of them; the combined value was about $137 billion, and about 141,000 IRAs held LLC interests (GAO-20-210, January 2020). The same report notes that owners may try to “reduce required minimum distributions by undervaluing unconventional assets like real estate or private equity.” The reverse is the common problem for a holder of a fund marked down after December 31: the RMD stays tied to the old, higher number for the whole year (our reading of 1.408-8(b)(2)).

What the number is for each vehicle type (our reading of the filings below): an interval fund prices daily or at least weekly (Rule 23c-3(b)(7) requires at least weekly), so the December 31 NAV is a fund figure; a non-traded REIT such as BREIT repurchases at a monthly transaction price that “will generally be equal to our prior month's NAV per share”; a private fund or a property usually has only a quarterly statement or an appraisal, which the custodian must turn into a December 31 figure.

The Uniform Lifetime Table you will use in 2026

Publication 590-B tells owners figuring the 2026 RMD to divide “your account balance at the end of 2025” by the factor for their age on their 2026 birthday:

Source: IRS Publication 590-B (2025), Appendix B, Table III (Uniform Lifetime). The full table to age 100 is in the CSV.

What 97 funds' own filings say about RMDs

An interval fund must offer to buy back 5% to 25% of its shares at set intervals (17 CFR 270.23c-3(a)(3)) and, when more is tendered than it buys, prorate. The rule's own exceptions to proration are for holders of fewer than 100 shares who tender everything and for all-or-none elections chosen by lot (270.23c-3(b)(5)); it says nothing about RMDs (our reading). Whether a fund gives RMD tenders priority is therefore the fund's own term. We searched EDGAR's full text for “required minimum distribution” and “required minimum distributions” in every interval-fund repurchase notice (Form N-23C3A) and issuer tender offer (Schedule TO-I) filed from October 1, 2025 to October 10, 2026, downloaded the 408 documents and sorted each filer's language (scripts saved with the page). For scale, 171 distinct filers filed an N-23C3A and 239 a Schedule TO-I in the period, 402 in all, so most do not mention RMDs in these documents at all.

Source: SEC EDGAR full-text search and the 408 documents it returned, read October 11, 2026; EDGAR quarterly form indexes 2025 Q4 to 2026 Q4. Each filer is counted once, in the first row that applies; filers that used both forms are counted with interval funds. Classification by our script.

Three readings (our arithmetic). Of the 26 full-acceptance filers, 19 are named First Trust or FT Vest and 3 Variant, so the promise is a house style of a few sponsors, not a market norm. The 30 filers that give RMDs any priority are 7.5% of the 402 filers of these forms. And full acceptance comes with a duty: Variant's notice says “It is the Shareholder’s obligation to both notify and provide the Fund supporting documentation of a required minimum distribution”.

Five vehicles, five different answers

Source: SEC filings 0001398344-26-017504, 0001213900-26-093392, 0001193125-26-411419, 0001193125-25-226477 and 0001662972-26-000111.

The Apollo fund is the case to study because its notice spells out the risk and its reports show the fill. The September 29, 2026 notice says: “With respect to any required minimum distributions from an IRA or other qualified retirement plan, it is the obligation of the shareholder to determine the amount of any such required minimum distribution and to otherwise satisfy the required minimum.” Its semi-annual report to March 31, 2026 says the fund repurchased about 30% of shares tendered at the November 4, 2025 deadline and 27% at February 3, 2026, and at May 5, 2026 “approximately 27% of the total number of shares tendered for repurchase”, or 7,026,204 shares for $172,360,589. If a holder needs all of a 2026 RMD from this fund, November 3, 2026 is the last 2026 deadline in the notice; the next quarterly offer falls in 2027 (our reading of its quarterly schedule). Our full history of its fills is in the Apollo Diversified Real Estate Fund repurchase schedule.

Two outdated details are worth knowing. Meketa Infrastructure Fund's September 2026 notice waives its 2.00% early repurchase fee for RMDs “taken from retirement accounts when the shareholder reaches age 70½”, an age the Code replaced (our reading of 401(a)(9)(C)(v)); ask whether the waiver applies at 73 or 75. And Redwood Private Real Estate Debt Fund, a real estate credit interval fund, says it “may accept” RMD tenders before prorating, which is a permission, not a promise.

If the asset cannot be sold by December 31

Here is the arithmetic for one owner (our example and arithmetic): $500,000 in a traditional IRA at December 31, 2025, all in one interval fund, owner turns 75 in 2026.

Excise tax is in addition to income tax on the distribution. Fill rates change every quarter; a tender can be filled at a different rate.

The routes, in the order the rules allow them (our reading):

• Take it from another IRA. Under 26 CFR 1.408-8(e)(1)(i) the RMD is figured for each IRA, but the total “may be distributed from any one or more of the IRAs.” A liquid traditional IRA can carry the illiquid one's share. A Roth IRA, a 403(b) or a 401(k) cannot (1.408-8(e)(3); IRS RMD FAQ Q5).
• Take it in kind. The regulation counts “all amounts distributed” (1.408-8(g)(1)), and the 1099-R instructions tell the payer to report property distributed at its “FMV ... on the date of distribution.” Moving fund shares or an LLC interest from the IRA to a taxable account in your name satisfies the RMD at that value, if the custodian and the fund's transfer agent will re-register them (our reading; ask both). You owe income tax on that value without receiving cash.
• Tender more, or earlier. In a prorated fund, tender enough to cover the RMD at the recent fill, and use every 2026 window, not only the last. Excess received is still a taxable distribution.
• If you still fall short. Take the missing amount as soon as you can and file Form 5329: the 10% rate applies only inside the correction window, and the waiver needs a reasonable error and steps to fix it (4974(d), (e)). Whether a fund's proration is a “reasonable error” is the IRS's call; we found no ruling on it.

For property owned through a self-directed IRA, the same rules apply, and paying the IRA's expenses or buying the property from it yourself raises the prohibited-transaction issues in our guide to self-directed IRA real estate rules. An amount treated as distributed because of a prohibited transaction does not count toward the RMD (1.408-8(g)(2)(iv)).

Verdict: what to settle before December

• You own other traditional IRAs with cash or listed funds: take the illiquid IRA's RMD from them under 1.408-8(e) and stop worrying about the queue for this year.
• Your only IRA is the illiquid fund: read the latest repurchase notice for an RMD term. If it accepts RMD tenders in full, send the documentation it asks for with the tender. If it prorates, tender with the fill rate in mind or plan an in-kind distribution.
• Your IRA owns a rental or an LLC: ask the custodian in October, not December, what December 31 value it will report and whether it can process an in-kind distribution of a fractional interest.
• You missed 2025 or earlier: take the shortfall now and file Form 5329 with the 10% rate or a waiver request; the correction window runs to the end of the second taxable year after the year of the tax (4974(e)(2)(C)).

What a holder can do with this

• Check the January 31 statement. The custodian must send the RMD amount or offer to calculate it by January 31 (Instructions for Forms 1099-R and 5498). Compare its December 31 value for the illiquid asset with the fund's own December 31 NAV.
• Find the fund's RMD term. It is in the repurchase notice (N-23C3A) or tender offer (Schedule TO-I) on EDGAR. Our census lists the 35 filers with an RMD-specific term and the accession number of each in the CSV. For how these offers work see what is an interval fund and tender offer funds explained.
• Count the windows left. A quarterly fund has few 2026 deadlines left as of October 11, 2026; Apollo Diversified Real Estate Fund's is November 3, 2026, and Variant Alternative Income Fund's RMD term is described in our Variant Alternative Income Fund page.
• Keep the paper. If you request a waiver, the IRS will want to see that you tendered in time and what the fund paid.

FAQ

Sources, read and saved on October 11, 2026: 26 U.S.C. 401, 408 and 4974 (U.S. Code 2024 edition, govinfo.gov); 26 CFR 1.408-8, 1.401(a)(9)-2, 1.401(a)(9)-5 and 1.401(a)(9)-9 and 17 CFR 270.23c-3 (eCFR, current to October 6, 2026); Federal Register documents 2024-14542 (final RMD regulations) and 2024-14543 (proposed rule); IRS Publication 590-B (2025), Instructions for Forms 1099-R and 5498 (2026), Instructions for Form 5329 (2025) and the IRS RMD FAQs; GAO-20-210 (January 2020); SEC EDGAR full-text search results, the 408 N-23C3A and Schedule TO-I documents they returned and the EDGAR quarterly form indexes; and filings 0001398344-26-017504 and 0001398344-26-010317 (Apollo Diversified Real Estate Fund), 0001213900-26-093392 (Variant Alternative Income Fund), 0001193125-26-411419 (Invesco Senior Loan Fund), 0001213900-26-092671 (Meketa Infrastructure Fund), 0001213900-26-040800 (Redwood Private Real Estate Debt Fund), 0001193125-25-226477 (Jefferies Credit Partners BDC) and 0001662972-26-000111 (BREIT). Counts, classifications and the worked example are our arithmetic; the scripts are saved with this page. This is analysis of public documents, not investment, legal or tax advice.