I am directing my Roth Ira to invest in real estate and have been hit with my first major tax stumper. I am buying a investment property through my Roth for 45K. I plan to give 35K from Roth funds and they will hold a non recourse promissory note for the 10K which debt will be in the name of my IRA. The note simply states i have 1 year in which to pay back the debt and there is no interest involved. I have someone who will purchase this home from me for 65K in 90days giving me a capital gain of 20K. I need to know if there will be any UBIT (unrelated buisness income tax) involved in this transaction. At no time will i use any money other than that which is in my IRA account. The 10k prommisory note will be paid with funds from a future sale of a current asset before i sale this one. Unfortunatley my Custodian will not give me any information and the CPAs and Attorneys in my area are not equiped to anwser my question. Can anyone enlighten me??

My question concerns the taxability of grandfathered 457 plans (i.e., pre-1986 plans for tax-exempt entities). How are amounts under a grandfathered 457 plan taxed? Is the taxability governed by the substantial risk of forfeiture requirement or are the amounts taxable when distributed/received (i.e, assume an installment payment schedule).

Thanks.

Facts: Parent sponsors Domestic Plan. Sub sponsors 1165(e) Puerto Rican Plan. Participants in the Puerto Rican Plan used to participate in the Domestic Plan, and they still maintain account balances in the Domestic Plan. Some of those account balances are in readily tradeable employer securities, and participants under the Domestic Plan may elect in-kind distributions. Parent would like to merge these account balances into the Puerto Rican Plan, but Parent does not want to transfer the employer securities. Instead, Parent would like to transfer the cash equivalent.

Question: Can Parent accomplish this without violating anti-cutback rules?

Explanation: I know that in-kind distributions of readily tradeable employer securities are protected benefits. I know, from PLRs 200317042 and 200352016, that Parent can merge the Domestic Plan into the Puerto Rican Plan. But there is no mention of 411(d)(6) in those PLRs. It appears as long as (i) the Puerto Rican Plan is an 1165(e) plan that covers only Puerto Rican employees (ii) the transferred account balances will not be "made available" to the participants prior to the allowed distribution dates under the Puerto Rican plan, and (iii) the transferred account balances provide at least as much benefit in the Puerto Rican plan as in the Domestic Plan - Then the merger is OK. Thoughts?

My boss is telling me that a standardized m&p may have a last-day requirement for allocations. He says to look in the 416 regs, and I have, but I don't see anything there to support his argument.

Rev. Proc. 2000-20 says, in Section 6.12.1, "A standardized plan generally may not deny an accrual or allocation to an employee eligible to participate merely because the employee is not an active employee on the last day of the plan year or has failed to complete a specified number of hours of service during the year."

Q 3:6 in the 2004 401(k) Answer Book says, unequivocally, "Also, a standardized document MUST provide a terminated participant who works more than 500 hours of service in a plan year an allocation of the employer's contributions." (emphasis added)

My boss is hanging his hat on the word "generally" in the passage from Rev. Proc. 2000-20. He discounts the 401(k) Answer Book, and tells me to keep researching. Should I?

One company acquired another company. Each company has its own 401(k) Plan. The client wants to perform ADP testing on each plan separately. The Plan of the acquired company fails the ratio percentage test (performed on a controll group basis). The average benefit test does pass. However, as required, all plans of the employer are taken into account.

That being the case, can the ADP test be performed separately for each plan?

Thank you!

According to the EBIA (Employee Benefits Institute of America) "A more than 2% shareholder in a Subchapter S corporation cannot participate in a cafeteria plan." This rule applies to Premium Only Plans as well... correct?

I have a new group who had a previous administrator that said it wasn't the case for a POP because it's not a Cafeteria Plan. I say, same rule applies - but it would be nice to get some confirmation!

I would like to know what others do for the following situation:

A company with hundreds of employees is late on depositing deferrals for many payrolls. We would calculate the lost earnings based on the highest return of the given mutual fund selections in the plan.

Now, how do you normally allocate the earnings out to the participants after you have come up with the total? For small plans it would be easy to allocate this for a few participants. However, this is such a large plan that it doesn't seem administratively feasible to allocate (say 8%) to each participant for 20 payrolls. The software does not do the calculation.

Are there any other suitable allocations that would be deemed reasonable? I can't find any support on the DOL website or via their VFCP.

Has anyone seen a recent IRS field directive or memorandum that was issued to IRS agents reviewing plan documents? It gives guidence to agents reviewing plans for letters regarding short service employees and other issues.

Thanks

Situation: Standardized plan is top-heavy. It requires 1 year of eligibility service for 401(k) participation, but also requires 2 years of eligibility service for employer nondiscretionary contributions.

Questions: If an employee is a participant for 401(k) purposes but not yet eligible for employer contributions, is a minimum contribution required for that person?

Decedent, unaware of the Section 691© deduction available to her beneficiaries, withdrew her entire IRA just before she died, to remove the income tax from her estate. The issue is whether her executors or the beneficiaries of her IRA can put the money back into the IRA, since the benefit of the stretchout would probably far outweigh the fact that the Section 691© deduction applies only to the Federal, but not the state, estate tax.

Gunther, 573 F. Supp. 126 (W.D. Mich. 1982) says yes. Rev. Proc. 2003-16 (which lists death as an example) and the temporary regulations under former Section 4981A suggest yes. But the IRS said no in PLR 200415011.

If the financial institution will let the executor put the money back (within the 60 days), and if the beneficiaries of the IRA are the same as the beneficiaries of the estate, the executor could put the money back, and then either seek a ruling (and take the money back out if the ruling is unfavorable), or run the risk of the excess contribution penalty. But if the financial institution won't let the executor put the money back, she'll need to get a ruling both on the rollover after death and the waiver of the 60 days. Even if the executor puts the money back without calling attention to the IRA owner's death, the financial institution may spot the issue when the beneficiaries set up their beneficiary IRAs.

Does anyone have any thoughts, other than having the executor move to the Western District of Michigan? Was anyone in this group involved in PLR 200415011?

Can an employer have a written loan program that excludes a participant's investment in employer securities for purposes of obtaining a loan? (e.g. all investments BUT the ER Stock Fund can be used for a loan)

A plan sponsor wants to almost freeze benefit accruals, except that the plan had a compensation limit in place for the final year of benefit accrual.

Is there any law to prevent us from drafting plan language to allow the benefit accrual fraction to be frozen as of a certain date, say 12/31/04, but allow the average compensation used in detemining the final accrued benefit to include one more year, say, through 12/31/05? We would also remove the plan's compensation limit so that statutory limits could be used instead for years prior to 12/31/05.

We would be open to not using the word "frozen" if the end result would be the same.

Thanks in advance for any comments or alternative suggestions.

Dave Peckham

An actively employed participant who is over age 70 1/2 and is not a 5% owner wants to know if they can begin to receive their min. distributions.

The required beginning date defined in the plan document is "April 1st of the calendar year following the later of the calendar year in which the Participant attains age 70 1/2 or the calendar year in which the Participant retires."

The only option selected in the adoption agreement is distribution upon termination (no in-service/normal retirement). In researching the regs it appears that the participant cannot take a distribution until they leave the company.

Is this a correct interpretation? Thank you

I know that a deemed distribution is not treated the same as an actual distribution for some purposes (i.e. mandatory withholding). However in a Plan that allows loans from a Safe Harbor Non-Elective source, is a deemed distribution precipitated by a loan default treated the same as an actual distribution? Additionally, if the participant in question is under age 59 1/2, is this distribution from the Safe Harbor Non-Elective source a prohibited transaction?

I am not a California practitioner, but I represent clients with California operations. I have read varying analyses of California's AB 2208, some of which seem to suggest that AB 2208 will indirectly, if not directly, require all California employers with insured medical plans to offer medical insurance coverage to domestic partners in any instance in which the employer is providing spousal coverage.

Other analyses I've read suggest that AB 2208 does not apply directly to employers and does not require employers to provide health benefits to their employees' domestic partners.

I've also received conflicting assessments from a couple of different insurers operating in California.

Any insights would be greatly appreciated.

I'm sure many have run into this in one way or another.

A few years ago a local financial planner contacted us about administering two small profit sharing plans. They wanted us to go through them (essentially work for them). We agreed and had them sign our services and fee agreement.

After receiving the plan information (documents, prior 5500's etc.) it became clear that both plans were a mess. We should have resigned right then and there but we did not. Since it was close to the filing deadline on both plans we spent about twenty hours cleaning up the plans and preparing 5500's.

The financial planner has refused to pay us and has generally not been cooperative in providing us information. The IRS now wants to audit one of the plans. We would like to resign as administrator on both plans as we have never been paid and dont think we should have to go through the audit for free.

Our services and fee agreement states that either party can resign with 30 days written notice.

Does anyone have a take on what our exposure would be by resigning?

Thanks much.

Is there any centralized reference materials (online preferably) that sumamrize the short term trading fees among the various mutual fund companies and their individual funds?

I have a primary job, which is my normal 8-5 job 5 days of the week. Now, I've talked with an editor of a computer journal, and am going to be writing articles for her journal, at $125 a page. I come up with some ideas of what to write about, and talk with it with the editor, then we decide if it's something that would make a good article. I can submit whatever I like (I'm not an official employee, I just submit articles), but the editor obviously can choose to only accept those that she feels are appropriate for the journal (thus it is prudent to talk with her before engaging on a venture). After articles have been accepted, I get a check from her business account.

So, my question is, given that information, what is the tax-treatment of all of this? Because of this separate source of income, are there any additional retirement plan options that are open to me (I currently have a 403b and a RothIRA)?

Thanks for any responses.

Has anyone had any experience with an amortization extension under IRC 412(e)?

How willing is the IRS for grant extensions? What happens if/when the plan becomes adaquately funded? What happens if the plan increases benefits during the extension period?

I'm deveoping retirement forms allowing for retro ASDs and I thought that I would have to provide information including QJSA Relative Value information for all forms of annuity for both the retro ASD and current ASD, because electing a retroASD is an option under the plan.

Now, I'm thinking that I would only have to do the 2 sets of calculations and disclose that including relative value information to the participant under the following circumstances: (1) not all forms of annuity are available at the retroASD, and/or (2) need spousal consent to elect a retroASD if the survivor benefit under that election is less than what would have been available under the plan's QJSA at the current ASD. If those 2 conditions do not apply to the participant, would you agree that I would not be REQUIRED to provide benefit information as of a current ASD??. However, if the situation could apply-i.e. say need spousal consent (2), then it would make sense to provide the information as of both dates for all participants as an administrative practice?

In other words--what is required from a notice perspective? Provide retirement information as of the retroASD and as of a current date OR just as of the retro ASD date with noted caveats mentioned above? Thanks.