Appleby

So very funny

...and Belgarath and FundeK. Good cite mbozek

I agree it does make sense…but see Q&A 7 of 1.402©-2 (a) and (b), no exception was provided if the IRA owner died before the RBD, but during the first RMD year. It appears then that the April 1 deadline is just an option to defer withdrawing what is already required for the age 70-½ year. 1.402_c__2.pdf

Me too. When I build my website, I made use it in my dictionary, if Bird doesn’t copyright it by then

R. Butler, It depends on the angle from which you look at it. Generally, Per Stirpes does not mean the original beneficiaries receive equal shares. For instance, using your example, where beneficiaries are B,C&D Per Stirpes- B, C & D would get the share allocated to them by the IRA owner. For instance, the IRA owner could designate that B gets 50 percent, C gets 25 percent and D gets 25 percent ( All Per Stirpes). The equal shares part comes into play for the beneficiaries of B, C and D. For instances, if B predeceases the IRA owner, and B has three children, then B’s share is split equally among B’s children

...Or ask if you can provide your customized beneficiary designation…or choose options that you are comfortable with…Usually, designations that include “ children Per Stirpes” as an option, includes other simpler options. The custodian, by including that option, is probably just trying to offer its customers flexibility. During the past few years, most of the IRA ‘default’ beneficiary provisions include ‘children Per Stirpes’ as a default designation, if the IRA owner is not survived by a spouse. As you know, the default option applies only if the IRA owner fails to designate a beneficiary, is not survived by the designated beneficiary , or if the designated beneficiary cannot be located and such

Good question. Let’s see…it appears there are two separate issues here 1)Did he die before the RBD, which would determine beneficiary options or 2)Is an RMD required for the year of death? An RMD is generally required for the year of death, if the year of death is the year the participant retires, and he/she is past age 70 ½, and the plan provides for a delayed RBD until April 1 following the year of retirement. Let me know if you agree with the following logic. First , let’s look at 1.401(a)(9)-5(b) , which defines Distribution calendar year. The issue now becomes, when is the employee considered to have retired? Would you agree that “ retire” and "severance from employment" is interchangeable for this purpose? If, so, then the employee’s death is tantamount to the employee being retired…see Treas Reg § 1.410(a)-7(b)(2) (i), which defines Severance from service date as “The date on which an employee quits, retires, is discharged or dies” If the employee is considered ‘retired’ in 2004, then an RMD is due for 2004 , even though the RBD would be April 1,2005. The RMD for 2004 must be satisfied by the beneficiary and is not rollover eligible. Your thoughts?

FundeK, I think R. Butler is right. I am not sure if you are agreeing with him/her or not . For instance if the children, Tom , Dick and Harry are the beneficiaries Per Stirpes…and Tom should predeceased the IRA owner, then Tom’s share that he would have inherited , had he not predecease the IRA owner, would go to Tom’s heirs.

Assuming the IRA had no other assets, and therefore no balance as 12/31/2003, there is no RMD for the IRA for 2004. RMD for the IRA begins for 2005. The RMD for the QRP should have been satisfied before the balance was rolled to the IRA. Since this did not occur, the amount rolled over –technically- includes the RMD for the QRP and that amount is ineligible to be rolled over. The wife must correct by figuring the RMD amount for the QRP, and removing that amount from the IRA as a “ return of excess “ contribution. This must be removed by April 15 next year. If she files her tax return on time, she receives an automatic 6-months (up to October 15,2005) to remove the amount

You need to remove the excess amount, including any earnings or less any loss. Some custodians will assist with calculating the earnings/loss, some will not. If you need assistance with calculating the earnings see the article at http://www.taxopedia.com/articles/retirement/04/042804.asp

Good question Fundek…and because of that it creates confusion for clients when we explain the withholding rules. Another approach is to follow the guidelines in Form W-4P, specifically the definition on periodic and non-periodic payments. Nonperiodic payments are the ones that can be installment payments http://www.irs.gov/pub/irs-pdf/fw4p.pdf

See also Treas Reg § 1.401(a)(9)-2, A-6.

Funny funny alanm

Calcu, given the reason behind the state law (preventing identity theft), wouldn’t it be in everyone’s best interest to use some other type of identifying number unique to the employee?

Joel, Your posts are interesting to me, but just a little bit hard to determine where your comments begin Vs the quotes. You may already know this, but you can indicated quotes by highlighting the quoted text and clicking on the “QUOTE” tab that appears above the posting box

I agree, if A adopts a SEP, then B must be covered under the SEP, since for retirement plan purposes, members of controlled group are treated as one employer. From what I understand, this means all employees of the businesses under common control must be covered under the same plan---if they adopt separate plans, they must be combined for certain testing. But to address PATAs specific question of whether or not company B could adopt a Solo/individual (k), the answer is no because an employer may not adopt an individual (k) if common law employees are eligible to participate in the plan…and the employees of Company A would be eligible assuming they are at least age 21 and work for at least 1,000 hours per year.

For retirement plan purposes, being the owner generally means being to make contributions to the account and not being required to take distributions except for RMDs that begin at age 70 ½. Only a spouse beneficiary can ever become the owner of the assets by electing the treat as own option…even then, that option applies only to IRAs. IMO, the decision to correct or not correct the form by changing the code from 7 to 4 would depend on how easy it is to file the corrected return and/or whether the customer/beneficiary mind keeping the Form with the code 7 given that there are really no adverse consequences from leaving it as-is. Changing the Code to 7 will just let the IRS know that the recipient is a beneficiary of the account-not the owner…however, assuming the name on the 1099-R is correct (name of deceased and beneficiary-designating beneficiary as such) that would have already been made obvious (to the IRS).

Since after-tax assets cannot be rolled from an IRA to a qualified plan, the client can accomplish that be determining the balance that represents the pre-tax amount and rollover just that amount to the qualified plan. No need to distribute the after-tax amount …unless the client wants to use the amount and roll it back to the IRA within 60-days

Code 7 is used only if the recipient is the owner of the retirement account, and is at least age 59 ½ when the distribution occurs See Page 9 to 10 of the instructions at http://www.irs.gov/pub/irs-pdf/i1099r.pdf

I guess I am insane- I like working in the wee hours of the morning, when everyone else is asleep including the cute kid who drives me insane during the daytime.

But they could not do a Solo 401(k) / individuak (k), even if it was deferral only...

As promised- reminder to fall-back

It should be Code-4. Code 4 helps to denote the amount as ' not subject to the 10-percent additional tax'

Unless you want to take a distribution and use the money to purchase the life insurance... and that would be a taxable transaction

I know Gary meant 10-25 percent as I acutally learned that from his book