Question: I am currently receiving Substantially Equal Payments (IRC 72t) from my IRA of approximately $3,000 per month and have been for more than 5 years. I turn 59 1/2 in October 2001. Would I be disrupting my 72t distributions if I were to, in mid August, withdraw a onetime distribution of $15k from my IRA, continue taking my $3k monthly, and on Oct 1, after my 59 1/2 b-day, withdraw $15k and then redeposit it (to cover the first $15k dist) within the 60 day window? How closely would the IRS look at this transaction? Thanks

Yes, this would be an impermissible modification of the substantially equal periodic payments. I don't know if the institution making the distribution has a reporting system sophisticated enough to modify the 1099R to show the 15,000 as a premature distribution, or whether the IRS system would produce a "blip" if it notices a large difference from year to year, and whether it cross-checks this year to year. Audit chances are obviously small if the IRS system doesn't flag it somehow.

Are you sure? The trustee is telling me as long as the funds are redeposited within 60 days then everything is fine - no disruption.

I'd be interested in what authority the Trustee is citing. Certainly possible that there is a PLR out there that I don't know about, but there's nothing in the regs or code that I'm aware of to support this.

I agree with the trustee. There is nothing is the regulations that state that taking a distribrution and rolling it over within 60-days- will violate the 72(t) agreement.

Africa - We'll have to agree to disagree on this one. But I'd highly recommend that you get expert tax/legal counsel on this one before you jump off the bridge. (and no, I'm not an attorney, so I'm not making a pitch for the profession...) Take a look at Arnold v. Comm (1998) where an additional withdrawal was held to be an impermissible modification. There's nothing in the code, regs, or PLR's that allows the additional withdrawal. Just because you roll it back in doesn't matter - it's still an additional withdrawal, and therefore an impermissible modification. Good luck if you do it anyway!

I agree with Belgarath. There is no language in the IRC specifically prohibiting distribution and rolling back ( within 60-days), a distribution from an IRA that is on a 72(t) schedule.. Nevertheless, this is not permitted, as it would constitute a violation of the agreement- for the reasons already stated. As you may already know, the tax code is generally written in the affirmative. Mostly, aside from prohibited transactions and the like, it tells what you may do, not what you may not do. You should check with tax counsel regarding this.