Appleby

You make a good argument counselor, but I am still leaning towards the other side of the fence. 1398 allows for the transfer, but I am not sure it is sufficient to determine that the transferee would not be required to continue the RMD.

The 6 -percent excise penalty applies if the excess is not removed by the individuals tax filing date, including extensions….and would therefore apply if he chooses to leave it in the IRA and apply it to the 2004 tax year. However, individuals who file their tax return by April 15 receive an automatic 6-months extension-to October 15 to remove the excess. Therefore, assuming your client file his tax return by April 15, he still has until October 15,2004 to correct the 2003 excess.

The Code is available at http://www4.law.cornell.edu/uscode/26/.

mbozek- I can always rely on you to give my brain a workout You are right- poor choice of words on my part. For the purpose of the post I had defined ownership rights as being ability to treat as own and make contributions to the IRA…but it still clouds the issue as it means more than just that as you correctly stated. What I should have said is that the non-spouse beneficiary who is giving the inherited IRA assets to his/her spouse can only transfer (to his/her spouse) the same rights to which he/she (the beneficiary is entitled). Since the beneficiary was not eligible to treat the assets as his/her own, then neither is his/her spouse. There are only two categories of individuals who can treat an IRA as his/her own 1. The individual who initially established and contributed to the IRA and 2. a spouse beneficiary of the individual who established the IRA....This individual is neither I agree with everything in your post except the comment Oranges and apples I think – The RMD requirement can be avoided/deferred by transferring/rolling one’s IRA or inherited IRA or QP assets to one’s QP only if one is the owner of the transferee account or the spouse beneficiary of the transferee account.

mbozek, You make a good argument, but I have to agree with Barry. IMHO, what is happening is a transfer of ownership and rights (for lack of a better term). Since the spouse giving up the assets is not a spouse beneficiary or the owner of the IRA assets, he/she has no ownership rights to transfers…ownership rights being ability to treat as own and make contributions to the IRA. Therefore, the spouse receiving the assets must continue maintaining the IRA as an inherited IRA, using the life expectancy options that were available to the spouse giving up the assets...and including the name of the deceased IRA owner in the title of the account

Marital/community property is usually limited to assets/property earned during the marriage and generally (therefore) does not include inherited property. Consequently, an inherited IRA should not be subject to 408(d)(6)…IMHO....but I am not a lawyer...

It appears not. The deadline for making your IRA contribution is your tax-filing date, not including extensions.

Good suggestion jevd…but the IRA owner could demand that the custodian process the distribution without the confirmation…and would be within his/her right to do so. For our customers, we explain the rules as they are to the IRA owner or their representative and leave the rest up to them. We never question instruction we receive to make the rollover, since the IRA plan document already include a hold-harmless language, that includes a statement that we are not responsible for determining whether rollovers satisfy the requirements of the Code

I think you pretty much said it You are right…. Under the Final RMD regulation, an IRA owner may transfer his/her IRA without distributing the RMD from the transferor IRA, providing the RMD is satisfied from the transferee IRA. This is allowed because RMDs for IRAs can be aggregated. This does not apply to the IRA to 403(b) rollover because, as you correctly stated, the IRA aggregation rules do apply to 403(b)s, but they do not cross-over, i.e. RMDs for 403(b)s cannot be aggregated with RMDs for IRAs. Therefore, since distributions from the 403(b) cannot be attributed to the RMD for the IRA, the option (to defer the RMD to the receiving account) available for trustee-to-trustee transfers between IRAs is not available for IRA to 403(b) plans Secondly, since the IRA to 403(b) would be a direct rollover (which by definition is a distribution and a rollover contribution as opposed to a trustee-to-trustee transfer which does not involve a distribution), the rollover would include the RMD amount (if not already distributed from the IRA) because the first distribution for the year is always attributed to or includes the RMD amount ( Treas. Reg. 1.408-8, A-4 ). Therefore, should the individual conduct a direct rollover from the IRA to the 403(b) prior to distributing the RMD from the IRA, it would result in the rollover including an ineligible rollover amount (The RMD for the IRA) to the 403(b) account. The argument could be made that since RMDs can be aggregated for IRAs, who is to say that the individual could not choose to distribute the RMD for the IRA from another/separate IRA?…but my response would also be Treas. Reg. 1.408-8, A-4. What do you think?

mbozek is right as usual. As I'm sure you know (but I want to mention it for the benefit of someone who may not ), the RMD for the IRA must be distributed before the direct rollover is made to the 403(b)…or if the transaction is done as an indirect rollover, the RMD must be retained (outside of the retirement environment) and the balance can then be rolled over.

jevd , Does this help? http://benefitslink.com/boards/index.php?a...st=0#entry72497

Ted7, Since you did not deposit the amount to your IRA by April 15, it is too late. Talk to your tax professional about filing an amended return to remove the contribution and to determine if you owe the IRS. Any amount you contribute now will be attributed to the 2004 tax-year

You’re on the right track jevd, but I would word the response a little differently ... for walgie, all distributions from his Roth IRAs will be tax and penalty-free because they will be qualified distributions, i.e. a ) It has been at least five years since walgie funded his/her first Roth IRA and b) walgie has met one of the four requirements (attaining age 59 ½). If walgie had not met the 5-year rule, then all distributions would still be penalty free, because he/she is at least age 59 ½, but distribution of earnings would be subject to income tax, because the distribution would not be qualified Also, the earnings on any Roth IRA assets are subject to one 5-year period, which begins the year the first Roth IRA for the individual is funded …only the conversion assets are subject to separate 5-year holding periods.

Some states grant protection regardless of the source of the IRA funds. You need to check with a local attorney to be sure. See for http://www.ici.org/issues/sta/arc-leg/00_s...krupt_surv.html. This is a little dated, but it gives you the cite, which should help to make your research much easier.

Agreed. Generally, the excess amount is credited to a suspense account to be allocated to participants the following year. Returning the amount to the employer could be cause for disqualification. Your heading says “Mistake in fact”, but this does not appear to meet that definition. See the following for additional info http://www.benefitslink.com/boards/index.p...topic=14199&hl=

Just a follow-up ... …if the plan does not allow the daughter to distribute the assets over her life expectancy, she may consider using the assets to purchase a tax-deferred annuity, thereby deferring taxes…assuming the IRS would make the same favorable ruling on her behalf as they did in PLR 200244023 . Of course, considering that a PLR can be costly, if the inherited sum is small, it may not be worthwhile.

Good reference Harwood; but it refers to an IRA- I disagree with Sal (did I hear a Roll of Thunder )- just kidding… It appears that this rule, that allows a non-spouse beneficiary to transfer inherited assets between qualified plans, applies only in the case of a merger or similar type of transaction, where the transaction does not result in the plan being terminated and therefore requiring participants to distribute their assets. If the merger provides that participants’ assets are transferred to the new plan, then beneficiaries’ assets may also be transferred to the new plan. The option is also available under multiple employer plans. It would not apply under other circumstances. For instance, if your client inherited assets from his brother who was an employee of Merrill and had assets in Merrill’s DC plan, and your client is self employed and maintains a DC plan for his business, your client could not transfer the inherited assets to his DC plan

Hey Kid , I see (from one of your earlier posts) that you attend university in my neighborhood- Maplewood/South Orange. Hey neighbor Regarding your question, this is no different than if the individual presented you with a new/different check on 4/19. The fact that the check bounced is tantamount to a check never being presented ( to your financial institution) As far as cites… If the check is returned by the bank for insufficient funds, or bounces for any other reason, it is deemed that no contribution was made when the check was presented by the drawer ( IRA owner) [springfield Productions, Inc, 38 TCM 74 (1979)]PLR 8824047 Not to mention that the drawer may have committed fraud by presenting a check for which he/she knowingly has no funds to cover . I doubt your financial institution could be forced to be party to a fraudulent transaction by purporting that the transaction satisfies IRS requirements (in this instance, meets the 04/15 deadline) …don’t say that to the client though, he/she may get upset :angry:

Actually, he can use the IRS form. The SEP can be established by tax filing deadline including extensions. If no extension was applied for, then it is too late.

Ask them for a cite and/or demand to speak with a supervisor

nomenclature??I learned a new word today...I think…now let’s see if I can use it in a sentence.

Misty, I think I see where we disconnect. I am using the term self-employed to mean an owner of any business (including a corporation) who is employed by his/her business.- of course, my use may be incorrect, since as you correctly stated , the definition is a sole proprietor or a partner in a partnership. Instead of saying self-employed individuals, I should have said self-employed individuals and owner-employees. Semantics? Maybe, maybe not ...For simplicity, maybe the term small business owner should be used, since it covers both Your thinking is that the Individual (k)/Solo-K Plan can be adopted only by self-employed individuals ( as defined above), but that is not so. The K-plan can be adopted by self-employed individuals and owner-employees. Therefore, the owner-employee of a corporation may adopt a K-Plan, providing the only individuals eligible to participate in the plan are owner-employees…

Very true…but some (including the IRS) continues to use the term… and now, the definition has morphed into a QP for self-employed individuals. Personally, I don’t use the term and we never refer to it in our publications or documents … when a client tells me he/she has a Keogh, I try to get him/her to use the right term i.e. profit sharing, MPPP 401(k) etc…

Yes. For reference see page 1 of Inst for filing 1099-R at http://www.irs.gov/pub/irs-pdf/i1099r.pdf

Misty, I don’t understand your comment. The Keogh is available to self-employed individuals (which includes sole proprietorships, partnerships and corporations) and their employees, whereas the Individual (k) Plan is available only to self-employed business owners, which includes sole proprietorships, partnerships and corporations…Am I missing something?