Appleby

mpedroza, For his example, there will be NO penalty ( given that only the earnings in a Roth IRA is usually subjected to taxes and penalty-if the distribution is non-qualified) If he takes a total distribution, it will be considered a return of basis and therefore tax and penalty free. I like Mary Kay Foss solution Joseph Ssiska, check out the following URLs http://www.fool.com/taxes/2002/taxes020222.htm http://www.mpowercafe.com/retirement/featu...4_11202001.html They address deducting IRA losses

Barry, Like you said earlier, an individual would probably need their own PLR to convince a custodian to do such a transaction. If this was permitted by the regs, then a PLR would not be required to effect/authorize the transaction. If the individuals in question receives his/her own PLR, then it would be very unwise for any custodian to refuse to process the transaction. As an aside, there are instances where the IRS has a. made opposing rulings in different PLRs b. issued PLRs that revoked prior PLRs One of the reason why custodian are hesitant to use a PLRas the basis for allowing a transaction not permitted by the regs. mbozek , The normal tax result is never affected. It is the 10 percent penalty that is. If the account in question is an IRA, the spouse can do whatever he/she wishes, i.e. treat-as-own, or treat as an inherited IRA and take penalty free distributions. If the account in question is a qualified plan, it can be rolled to an IRA in the spouse beneficiary’s name. However, this IRA cannot be an inherited IRA, because rollover contributions may not be made to inherited IRAs as Inherited IRAs do not qualify for rollover treatment 408(d)(3)©. In PLR 8623054, the IRS ruled that the distribution rules applicable on death will not apply to the spouse’s interest in the deceased spouse's IRA if the spouse elect to treat the deceased spouse's IRA as his/her own IRA. The question then becomes, how does a spouse beneficiary elect to treat his/her deceased spouses IRA as his/her own? As you know, one way of doing so is by making contributions (including rollover contributions) to the IRA. It seems pretty clear than the spouse in question cannot do what he/she wants to do, i.e. roll the QRP assets to an “inherited IRA’ and take penalty free distribution- unless he/she obtains a personal PLR from the IRS to do so.

mbozek You are right about the passage of the rights of ownership- however, you are missing the point. By making a rollover contribution to the IRA, the spouse has elected the treat-as-own option. This means that the IRA is no longer an ‘inherited IRA’ and distributions will not be reported as ‘distributions due to death’. I also agree that inherited IRAs enjoy the same tax deferred as any other IRA- my comments never suggested otherwise. The issue here is not whether or not an inherited IRA is a tax deferred vehicle- it is whether or not the IRS permits such an IRA to receive rollover contributions. The individual’s goal is to rollover the inherited QRP assets to an IRA. This a spouse beneficiary may do. The individual then wants to take penalty free distributions (due to death) of these rolled over assets- this is not permissible. If she wants to take penalty free distributions, then these must be taken from the qualified plan as ‘distributions due to death’ ( which are not rolled to an IRA)

http://www.treasury.gov/press/releases/po3498.htm

http://www.treasury.gov/press/releases/po3498.htm

http://www.treasury.gov/press/releases/po3498.htm

Forgot the attachment Remember also that a PLR may not be cited as precedence or law

PLR 9608042 (attached) permitted the spouse beneficiary to roll inherited assets from her husband’s money purchase plan account to his IRA. She was the designated beneficiary of his IRA and was therefore permitted to move the assets to an inherited IRA .. Distributions from the inherited IRA were of course penalty free. The IRS seems to have erred on this ruling. I don’t see how a custodian would accept a rollover contribution to a deceased person’s IRA. Who will authorize the contribution? There are some things that executors and spouses are not permitted to do with IRAs unless specifically permitted in the regs. (e.g. a executor may recharacterize a Roth contribution after the IRA owner's death). Also.. if she is the beneficiary of the money purchase plan, shouldn’t the assets be made payable to her and not the deceased person? The more reason why the contribution would not be deposited to his IRA , since it would be a third party transaction . Africa6796, rollover contributions may not be made to inherited IRAs: Treas Reg describes distributions that may be rolled to an eligible retirement plan. An eligible retirement plan is defined under 4029c)(8)(B). The definition does NOT include an inherited IRA. The Code also talks about denial of rollover treatment for inherited IRAs.

You’re absolutely correct- I too have seen that on many occasions.

Just a reminder of what may seem obvious to some of us: Many of my customer’s with clients in this or similar situations- submit instructions to process a distribution from the traditional–inherited IRA and use the same assets to make a contribution to the Roth IRA. In many instances, the assets in the traditional IRA are illiquid (e.g. limited partnerships, private placements) or made up of other non-cash items. These must be liquidated prior to the transaction being requested/processed, as contributions to IRAs must be made in cash.

True Gary- but...I think in this particular case, it is the leasing organization that operates the 401(k), while the employer maintains the SIMPLE.

Thanks mbaca, the link to the column is below. http://employerbook.hypermart.net/0221Comment.html

rcline46, what is the Rev Rul number?

See also Rev Rul 86-142- attached

There is no regulation that specifically address this issue. We rely on PLRs ( note that PLR’s cannot be cited as precedence , but gives a very indication of how the IRS views certain situations). Ultimately, you need to refer to the IRA plan document, which should provide the custodians’ stance on fee reimbursements. Generally, once fees have been charged to an IRA, they cannot be reimbursed. Any reimbursement must be reported as an IRA participant contribution and reported to the IRS as such. Some fees may be paid out of pocket, prior to being charged to the IRA, these pre-payments will not be treated as IRA contributions and will not be reported to the IRS. These are usually administrative fees. Trade related fees must be paid from the IRA – may never be paid out of pocket and cannot be reimbursed. See PLR 8830061 attached.

The state is which the IRA was originally established is not allowed to tax the IRA assets (when distributed). For years beginning 01/01/96, House Report 394 [Pub L 104-95] prevented states from taxing IRA owners and qualified plan participants who established the account while living in the state, but later moved to another state.

Check out this link http://www.benefitslink.com/boards/index.p...ST&f=18&t=14460

Just above the button for “submit reply” ( at the bottom the area you type your response) there is a “browse” button. Click on the “browse” button. You folders will appear. Select the folder that has the document. Then click “Open”. The file will then be attached. Click the “submit reply” button. Good luck

You are absolute right- in fact; this is an ideal candidate for the Individual 401(k)-assuming their compensation makes sense. i.e. if they can already maximize in a profit sharing plan without salary deferrals, then the PSP would be a better choice.

Neither of the responses are correct. This is how it work- I will list two scenarios, full account and partial account transactions. 1. Full Account. This is where you converted assets to a Roth IRA, which had no other assets in the Roth prior to the conversion. You now decide that you want to reverse (recharacterize) the conversion. You made no contributions or distributions in the Roth IRA. You will recharacterize the entire balance of assets in the Roth IRA. It does not matter if you still own the same assets you converted (i.e. you conducted various trades). 2 Partial account You had some assets in a Roth IRA from previous contributions and conversions (from last year) Earlier this year, you converted 100 shares of XYX stock to the Roth IRA. You now decide that you want to recharacterize the conversion done earlier this year. You must do the following: Perform a calculation to determine the current value of the conversion done this year. TO do so, you cannot look just at the performance of XYZ stock, but must take into consideration the performance of the entire account. This means that XYZ stock may have lost value, but based on the performance of other stocks, you may need to recharacterize a value higher than what you converted. ( or vice versa) Once you determine the value of the conversion, you recharacterize that amount to the traditional IRA. This recharacterization does not have to be of XYZ stock, it could be cash, any other stock/s XYZ stock, or a combination thereof. As long as the assets that are recharacterized equal to the current value of the conversion ( i.e. the value determined when you take into account the performance of the entire account during the determination period) . Makes sense… The attached document explains how the calculation must be done.

You’re welcome

R. Butler, To insert a link (URL), go to the address field ( i.e. where the www. Etc is) and highlight the full address. Copy the address and paste it into the note you are writing. Anyone will then be able to click on the link and access the site.

I agree with actuarysmith. Regarding the SIMPLE, EGTRRA does apply. The employee/participant may defer $7,000 or 100% of compensation, and the employer may match $for$, up to 3% of the employee’s compensation.

I know what you are saying pmacduff. And we are saying that yes- it can be done. Remember that the SIMPLE and traditional IRAs operate under the same distribution and transfer rules – with the exception of the two-year waiting period that applies to the SIMPLE IRA. The rule to which you refer applies only to qualified plans, 403(B) plans and 457 plans.

…Franky we need to be careful when relaying information to lay people- you will find that in the retirement business, customers take these terms literally and by definition, a transfer is a non-reportable transaction as opposed to a distribution/rollover which is reportable. The context that you cite merely use the term transfer to mean reassigning … but we will agree to leave it at talking semantics . pmacduff- you are confusing SIMPLE IRAs with qualified plans. The answers are correct.