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Appleby, After 25 years + in the business, nothing that the service does suprises me anymore but your right. It is irritating and you think they would listen to the professionals in the industry. They say the Service keeps an eye on these boards. Maybe they need a monical for the eye.

Check this URL http://www.irs.gov/pub/irs-pdf/i1099r.pdf

Check IRS Pub 590 at IRS.gov Here is the actual URL http://www.irs.gov/pub/irs-pdf/p590.pdf

Blinky, I'm far from an expert on this subject, but I'm aware of many self-employed farmers using Schedule F income as compensation for qualified plans. Does that individual at your firm still have the research? Any specific justification for the opinion? Any one else have a comment on this subject. CPA's Tax Attorney's in the House??? :

Distributions from IRAs are considered non-periodic payments and are subject to the 10% withholding unless declined. Distributions from Qualified plans for RMDs would fall under the periodic rules and wage withholding tables defaulting to Married with three dependents if no election. Withholding may be declined as well. As stated above mandatory withholding does not apply to RMDs. It may apply to amounts in excess of the RMD from a Qualified Plan.

Check out Aspen Publishers Answer Book Series on-line as well.

Thanks again all.

Thank you for your replies. This is just an example of many situations encountered in the transfer of decedent (inherited) IRAs from plans with plan provisions regarding beneficiary rights that differ from the receiving plan. Do any of you have specific procedures in place such as requiring the plan information including beneficiary designation information and copies of the IRA plan document from the transferring plan? This situation may be relieved to some degree if pending legislation allowing a non-spouse beneficiary to rollover benefits to an IRA in their own name passes. I'm not holding my breath. Thanks again

One non-spouse beneficiary of several named transfers an inherited IRA from one institution to another. The IRA plan documents have different language regarding the hierarchy of beneficiaries. The original plan eliminates any and all contingents at the death of the IRA participant if a primary beneficiary is alive at the death of the participant unless a "Per Stirpes" designation is used. The receiving IRA provides that a contingent beneficiary receives the funds in the event of the death of the primary beneficiary regardless if the primary dies before or after the IRA participant. The receiving plan also does not allow beneficiaries to name beneficiaries. There are many permutations of this example possible involving multiple primary & contingent beneficiaries and transfers of inherited IRAs between plans. I have not found any guidance in regard to this type of issue. Is it a contract or other state law issue? How are other trustee/custodians handling decedent IRA transfers when plan language differs? Thanks

I disagree.The first distributions in a year for which an RMD is required are considered to be RMDs and therefore are ineligible for rollover. The RMD from the qualified plan was required for 2003. You have an ineligible rollover in the amount of the RMD subject to the rules for excess IRA contributions. Since the individual is over 70 1/2, there is no option to consider it a valid IRA contribution. It must be removed or it is subject to penalities and additional taxation if not removed by the deadlines.

If client turned 70 1/2 in 02 then no IRA contribution is available. The financial institution will treat as removal of excess rollover. Probably should talk to tax preparer about treating the excess amount as being taxable in year 03 ( taken from 401k as difference between amount received and amount rolled over) as the RMD. Then earnngs on excess will be taxable but no penalty.

Final Catch Up Regs in IRS Bulletin # 37 http://benefitsattorney.com/cgibin/framed/...gi?ID=41&id==41

Has anyone see this? Comments? National Employee Savings & Trust Equity Guarantee Act of 2003. This is the Senate Finance Comittee Chairman's Modification as published by the JCT <a href='http://www.house.gov/jct/x-78-03.pdf'>http://www.house.gov/jct/x-78-03.pdf</a> I know its only proposed but it is interesting. Bringing back some changes to 5500 reporting dropped from EGTRRA and some IRA changes as well.

Does this help? Noel Ice's site http://www.trustsandestates.net/MRDRegs/MR...htm#_Toc9937165 1.401(a)(9)-1 RMD REGS Annotated by Noel ICE see (b) (2) Will the plan allow this election? 1.2 Q-2. Which employee account balances and benefits held under qualified trusts and plans are subject to the distribution rules of section 401(a)(9), this section, and §§1.401(a)(9)-2 through 1.401(a)(9)-9? A-2 (a) In general. The distribution rules of section 401(a)(9) apply to all account balances and benefits in existence on or after January 1, 1985. This section and §§1.401(a)(9)-2 through 1.401(a)(9)-9 apply for purposes of determining required minimum distributions for calendar years beginning on or after January 1, 2003.[56] (b) Beneficiaries. (1) The distribution rules of this section and §§1.401(a)(9)-2 through 1.401(a)(9)-9 apply to account balances and benefits held for the benefit of a beneficiary for calendar years beginning on or after January 1, 2003, even if the employee died prior to January 1, 2003.[57] Thus, in the case of an employee who died prior to January 1, 2003, the designated beneficiary must be redetermined in accordance with the provisions of §1.401(a)(9)-4 and the applicable distribution period (determined under §1.401(a)(9)-5 or 1.401(a)(9)-6T, whichever is applicable) must be reconstructed for purposes of determining the amount required to be distributed for calendar years beginning on or after January 1, 2003.[58] (2) A designated beneficiary that is receiving payments under the 5-year rule of section 401(a)(9)(B)(ii), either by affirmative election or default provisions, may, if the plan so provides, switch to using the life expectancy rule of section 401(a)(9)(B)(iii) provided any amounts that would have been required to be distributed under the life expectancy rule of section 401(a)(9)(B)(iii)[59] for all distribution calendar years before 2004 are distributed by the earlier of December 31, 2003 or the end of the 5-year period determined under A-2 of §1.401(a)(9)-3.[60]

Understood. My reference to the less than 3% match wasn't to imply that it was required for all eligible, only those deferring. I actually agree with you all. The non-elective contribution was what I was referring to when I said that all eligible must receive it. Appleby, You're correct. I did misread the question. It was too early in the A.M. My apologies to you all.

Your accountant is correct see Pub 590 and IRC 408(p)(2)(B) EMPLOYER MAY ELECT 2-PERCENT NONELECTIVE CONTRIBUTION.-- 408(p)(2)(B)(i) IN GENERAL.--An employer shall be treated as meeting the requirements of subparagraph (A)(iii) for any year if, in lieu of the contributions described in such clause, the employer elects to make nonelective contributions of 2 percent of compensation for each employee who is eligible to participate in the arrangement and who has at least $5,000 of compensation from the employer for the year. If an employer makes an election under this subparagraph for any year, the employer shall notify employees of such election within a reasonable period of time before the 60-day period for such year under paragraph (5)©. It doesn't say only those eligible who are deferring. It says each who is eligible to participate. There is also a provision for a MATCH less than 3% but only for a limited # of years. Check Pub 590 and other sections of 408(p) for those rules.

MBOZEK is correct. Check instructions for form 990 T. In addition, in some cases prior years losses may be used to reduce current year gains as long as prior 990Ts were filed. I'm not an accountant so have your client check with their tax professional.

My understanding is that any direct payment by the IRA participant from personal funds would probably be considered a contribution to the IRA and if the IRA owner was ineligible to make additional contributions for that year they would be subject to any excess contribution penalities and subsequent tax issues if not withdrawn. Question # 2. If the tax was not paid, the IRA would be subject to interest and penalities for non-payment. These are the issues that must be considered BEFORE an IRA participant invests in assets that generate UBTI.

It depends on the AGI & Filing status of the couple. See Pub IRS 590 for a complete explanation. Found at IRS.gov http://www.irs.gov/pub/irs-pdf/p590.pdf

Blinky, You must be in the NorthEast. Even three eyes can't help in the dark. Have a pleasant week-end.

The bill has passed the House and has been read twice in the Senate. It is on the Senate Calender and has been since March. It is part as stated above of a Bankruptcy reform bill. It had many co-sponsors in the House. You may check the status by going to thomas.loc.gov and searching for HR 975. By the way, for all of you newbies who wish to track legislation, this is a great site. Its also a great place to educate yourself on the legislative process. Complete address below http://thomas.loc.gov/

Appleby, What is your inside source. Trade Secret? I can't locate any other published source. Not in current IRS Bulletins that I can see. Thanks so much again for making our reporting staff's week end.

Thank you for the post. Its good news for all of us who offer ESAs. It would be a good idea for all of us who offer these plans to send comments to the service.

After 21 years of marriage, I discovered a new way of keeping alive the spark of love. A little while ago I had started to go out with another woman. It was really my wife's idea. "I know that you love her," she said one day, taking me by surprise. "But I love YOU," I protested. "I know, but you also love her." The other woman that my wife wanted me to visit was my mother, who has been a widow for 19 years, but the demands of my work and my three children had made it possible to visit her only occasionally. That night I called to invite her to go out for dinner and a movie. "What's wrong, are you well," she asked? My mother is the type of woman who suspects that a late night call or a surprise invitation is a sign of bad news. "I thought that it would be pleasant to pass some time with you," I responded. "Just the two of us." She thought about it for a moment, then said, "I would like that very much." That Friday after work, as I drove over to pick her up I was a bit nervous. When I arrived at her house, I noticed that she, too, seemed to be nervous about our date. She waited in the door with her coat on. She had curled her hair and was wearing the dress that she had worn to celebrate her last wedding anniversary. She smiled from a face that was as radiant as an angel's. "I told my friends that I was going to go out with my son, and they were impressed," she said, as she got into the car. "They can't wait to hear about our meeting". We went to a restaurant that, although not elegant, was very nice and cozy. My mother took my arm as if she were the First Lady. After we sat down, I had to read the menu. Her eyes could only read large print. Halfway through the entrees, I lifted my eyes and saw Mom sitting there staring at me. A nostalgic smile was on her lips. "It was I who used to have to read the menu when you were small," she said. "Then it's time that you relax and let me return the favor," I responded. During the dinner we had an agreeable conversation -nothing extraordinary -but catching up on recent events of each others life. We talked so much that we missed the movie. As we arrived at her house later, she said, "I'll go out with you again, but only if you let me invite you". I agreed. "How was your dinner date?" asked my wife when I got home. "Very nice. Much more so than I could have imagined," I answered. A few days later my mother died of a massive heart attack. It happened so suddenly that I didn't have a chance to do anything for her. Some time later I received an envelope with a copy of a restaurant receipt from the same place mother and I had dined. An attached note said: "I paid this bill in advance. I was almost sure that I couldn't be there but, never-the-less, I paid for two plates - one for you and the other for your wife. You will never know what that night meant for me. I love you." At that moment I understood the importance of saying, in time: "I LOVE YOU" and to give our loved ones the time that they deserve. Nothing in life is more important than God and your family. Give them the time they deserve, because these things cannot be put off till "some other time". Somebody said it takes about six weeks to get back to normal after you've had a baby ...somebody doesn't know that once you're a mother, "normal", is history. Somebody said you learn how to be a mother by instinct ...somebody never took a three-year-old shopping. Somebody said being a mother is boring ...somebody never rode in a car driven by a teenager with a driver's permit. Somebody said if you're a "good" mother, your child will "turn out good"...somebody thinks a child comes with directions and a guarantee. Somebody said "good" mothers never raise their voices ...somebody never came out the back door just in time to see her child hit a golf ball through the neighbor's kitchen window. Somebody said you don't need an education to be a mother ...somebody never helped a fourth grader with his math. Somebody said you can't love the fifth child as much as you love the first...somebody doesn't have five children. Somebody said a mother can find all the answers to her child-rearing questions in the books ...somebody never had a child stuff beans up his nose or in his ears. Somebody said the hardest part of being a mother is labor and delivery...somebody never watched her "baby" get on the bus for the first day of kindergarten ... or on a plane headed for military "boot camp" Somebody said a mother can do her job with her eyes closed and one hand tied behind her back ...somebody never organized seven giggling Brownies to sell cookies. Somebody said a mother can stop worrying after her child gets married...somebody doesn't know that marriage adds a new son or daughter-in-law to a mother's heartstrings. Somebody said a mother's job is done when her last child leaves home...somebody never had grandchildren. Somebody said your mother knows you love her, so you don't need to tell her....somebody isn't a mother.

It is my understanding that you may aggregate your IRA balances for determining your series of payments but be careful, once aggregated, you may not add funds or withdraw funds other than your calculated payout without creating a break in the payments and being subjected to penalties. There is an informative site dedicated to these type of payments at www.72t.net