mbozek

One advantage to selling property on the open market is that the er can claim a tax loss. The er deduction for property contributed to a DC plan is the FMV of the property at the time of contribution. Rev. rul 73-583. If the FMV exceeds the cost the er has a taxable gain. RR 73-345. However, a loss is not deductible under IRC 267(b)(4). RR 61-163. If the er deduction is limited to the FMV of the asset at the time of contribution it would be imprudent for the trustee to value the property as a plan asset at a higher amt. The trustee can decline the asset because of a lack of liquidity, volitility or failure to meet funding critieria for plan assets.

The terms of the plan control the distribution options which are available to a beneficiary. The Plan admin must give the bene a statement of the distribuon options which are available.

Other than the cost of selling the asset why does it matter whether the sponsor gives the property or cash since there will be a capital gain/loss in either event?

Its the clients risk if the employer does not comply with the law.

DH: " The future is uncertain and the end is always near." - Jim Morrison, the Doors, Road House Blues. But we can only plan for the future based upon the laws as they are currently legislated since there is no way to predict what could occur in some unlikely circumstance in the future. The rest of you comments are irrevalent as the sup ct will not permit suspension of habeas corpus by presidential decree and FDR did not confiscate gold- he just changed the law to prevent the US govt from exchanging paper money for gold. Just here do you get your info from?

DH your analysis of possible tax changes is somewhat flawed. Consumption or value added taxes are more talked by academics and tax policy wonks rather than elected reps, even republicans, because of their regressive nature. Politicians still remember that Al Uhlman, the dem chairman of ways and means was defeated in 1980 because he had talked about replacing the income tax with a VAT tax. When Congress changes the income tax law it does so only a prospective basis because it does not disturb the expectations of taxpayers who are entitled to rely on the law in effect when the funds were deferred. Taxation of SS benefits was the exception because of the crisis in funding SS in 1983 and because the changes were approved by a bi partisan committtee headed by Sens Monyihan and Dole. Generally when Congress changes the income tax law it grandfathers amounts deferred prior to the change under current law, e.g., the recent changes in NQDC only affect amounts deferred after this year. When Congress eliminated universal IRAS in 1986 it allowed amounts deferred to prior to 1/1/87 to remain deferred. Any changes in roth IRAs will be prospective affecting amounts deferred before the effective date of the change. Increases in income tax only occur when the Dems control the house of Reps because tax legislation must orginate there which is unlikely given the current population shift to the south and west. Finally your analysis of the validity of income taxatation prior to the 16th amendment is incorrect. Congress always had the power to tax income from wages, it was only prevented from taxing income derived from property prior to the 16th amendment. Hence the language of the 16th amendment that authorizes taxation of income regardless of the source.

It depends on whether there is a binding contract upon the applicant's acceptance of the offer and what is the detrimental reliance. In the US employees can be fired for any non discriminatory reason after they are hired without liability. In some cases an employer has been held liable if the prospective employee signed a letter accepting the position and incurred financial expenses such as moving costs to relocate before the offer was recinded. You need to consult with counsel and pay for the review.

There are different tax consequences for pre and after tax contributons. Pre tax contributions are exempt from both income and the 7.65% FICA tax. After tax contributions are deductible only from income tax as a reduction of AGI and an employee can adjust withholding allowances on the w-4 to reduce withholding on the amount of after tax contributions. There is no need to wait until the income tax return is filed to receive the tax benefit from after tax contributions.

Bob : You can terminate the plan by taking what ever action is required under the plan document such as adopting a resolution if employer is a corp. You need to get a termination package from the 401k prototype sponsor to adopt all plan admendments necessary for 2004 and other instructions such as the need to file an 5500EZ form for the year in which the assets are distributed. Read pub 560 which is available on the IRS web site (irs.gov) for the rules for contributing to a SIMPLE plan if you have maintained a qualified plan and you can get both the instructions and the 5500 form at the same site. After termination you can roll the distribution to an IRA. Requesting irs approval of the termination of the plan is optional and you should discuss the need to file a 5310 form with your accountant if you are the only participant and the IRS has issued a favorable determination letter to the Ptype sponsor. If the above procedure is too much of a hassle you can amend the 401k plan to close it to new participants as of 12/31/04 and leave the assets which you have acumulated in the plan and not make further contributions. However you will have to pay any fees and expenses associated with the administration of a 401k plan and amend the plan for future changes in the tax law. If you follow this procedure you can borrow from plan assets which you cannot do in an IRA.

Spousal consent is not required under a nonqualfied plan subject to ERISA.

Dont put too much stock in these statments which are prepared by people who want to get attention. "Savings rate" is a broad term which includes positive figures such as employer contributions to retirement plans and is reduced by negative figures such as the debt incurred in purchasing a home or refinancing a mortgage. A few years ago the 0 rate of savings was blamed on corporate employers who could not contribute to overfunded pension plans. Now the 0 rate results from the increase in debt caused by home ownership.

If the stock is being exchanged for cash then she will be able to rollover her account to an IRA if the plan is terminated. If the plan is merged with the acquiror's plan she will be able to invest the cash in any option under the plan.

You need to hire tax counsel to review the plan and the limits for 419 plans under the IRC which prevent stuffing most of the benefits for the owners, e.g., providing term ins for the rank and file and variable life for the owners. An IRS determination letter or opinion letter from the promoter's attorney is worthless because they only review the form of the plan, not discrimination in operation or other abuses which can be audited by the IRS which will disallow the deduction for all open years. Under recent tax legislation an opinion letter will not protect the client from the imposition of tax penalites for substantial understatement of income which can be 75% or more of the tax due. Doing the research on your own is like operating on yourself- you dont know what you dont know.

Generally when a company is taken over the stock in the plan is exchanged for the acquiror's stock. There is no termination of the plan nor a distribution of the stock. In any event the plan sponsor will determine what becomes of the stock in the plan after the buyout and will notify the particpants of their options.

It seems that there are two solutions to the problem- remove the excess contributions and interest from the plan or wait until the s/l expires for assessing taxes.

The case also hold that the filing of a Sked P eliminates liability after the s/l expires. Also under the Estate of King, the determination that taxation occurred in a closed tax year prevents the IRS from assesssing taxes against the participants in a later year year when the mistake is discovered.

LI is only needed when it is a replacement for a loss of income of an immediate family member who supports the neices. One can assume that there will be sufficient LI on the income earning parents of the neices to provide for necessities such as college ed or the amount of LI can be increased. Therefore, the amounts placed into a 529 plan by a relative would be better used to increase the value of the fund instead of purchasing death benefits. Finding a LI policy that has low charges and good invesmtnet returns is an ardious task at best and the time could be better spent finding a low load mutual fund to invest the accounts in.

Q: what happens if the plan is audited after the s/l expires (assuming calander year plan with tax return due 3/15/01)? IRS cant disallow the 00 deduction.

You need to check state law but in most states partnership income is allocated equally among the partners after deducting expenses and return of capital unless the pship agreement provides otherwise. (e.g., NYS Partnership law Sect. 40). If state law permits sharing of income, H & W would each report their profits from the Pship for 04 on a separate Schedule C. Some states permit oral partnership agreements. For income tax purposes they would have to file the appropriate form designating the entity as pship. They need to check with a tax advisor to see if there are any restrictons on spousal partnerships under the IRC which would be different from the above rules. Under Rev rul 81-114 a qual plan adopted by the last day of a tax year can be established retroactively to the beginning of the year for all comp paid in the year. Otherwisde a SEP can be established up to the date for filing the Pship 04 tax return with extensions. The contributions are deducted from the income of the Pship and passed on to the partner who claims a deduction on the 1040. Each partner is subject to SECA tax on the net earnings from SE paid to them by the Pship before deducting the contribution on the 1040. Net earnings from SE is calculated on schedule SE. Since partners take above the line deductions on the 1040 for pension contributions, it does not matter whether the 13k is a salary reduction or employer contribution to the plan since both reduce taxable income and both are subject to SECA tax.

you really need to have this matter reviewed by an attorney since you are asking for a legal opinion.

An individual who files for bankruptcy must include a schedule of creditors listing all outstanding debts as of the date of the filing of the bankruptcy petition. The court then sends a notice to each creditor ordering them to cease collection of the debt. If the plan loan is not included on the schedule the plan admin must continue to collect the loan. I once reviewed a bankruptcy petition where the employee had taken out two loans from a 401k plan- one before the petition was filed and one immediately after the filing. The payment of the first loan was stopped but collection on the second continued. The rule against continuing payments after filing the bankruptcy petition only applies in Ch 13 cases-wage repayments where the employee negotiates to continue payments to creditors from current wages without being discharged from the debts. In Ch7 bankruptcy the amount of the assets /debts owed is fixed as the date of filing the petition and the employee can elect to repay the loan to prevent the outstanding balance being taxed as income because of default on the loan.

[/u]http://waysandmeans.house.gov/Links.asp?section=1559[/u] posted by TC walker on Oct 7 at 3:54pm under topic "HR 4520 is out of conference, headed to vote " Conf rpt also linked to the American Benefit Counsel site posted by Katherine on Oct 27 4:01pm under the topic HR 4520 and grandfathered provisions.

why cant u use 89-23?

403b plans can be operated in accordance with a reasonable good faith intrepretation of the non discrimination rules under IRS notice 89-23 instead of the final 401(a)(4) regs. See Notice 2001-46.

The conf. report P 524 contains the language quoted above. Also 409A taxes all deferrals of comp that are not expressly exempted and there is no exemption for NQ stock options under IRC 83 althouth there is an exemption in the conf report for ISOs and options granted under a 423 plan. My question relates to whether making a section 83b election removes the NQSO from the restrictions of 409A because taxation is no longer deferred and any future increase in value will be taxed as capital gains.