2001 IRS Pub 590 error?

[txdd]

It appears to me that the new Pub 590 has a fairly significant error in it regarding the new RMD rules. On page 30 near the bottom of the second column, it states that all beneficiaries should reduce their life expectancy by 1 for each year after the first distribution year. My understanding is that a sole beneficiary surviving spouse would use his or her current age to determine life expectancy in each year.

Which is correct? If my interpretation is proper, wouldn't this error be significant enough to require a corrected reissue of Pub 590?

[JAMES PATRICK]

I don't see a problem with the wording. If the spouse does not make the IRA their own, they use their age in the year the spouse would have been 70 1/2 and decrease it by one every year thereafter.

What do you see wrong that I am not catching?

[Appleby]

It depends on who the beneficiary is.

For a spouse beneficiary, the life expectancy is done on a recalculated basis, i.e. the table is visited every year to determine the life expectancy.

However, for non-spouse beneficiaries, the life expectancy is determined on a non-recalculated basis, i.e. determined in the first year by consulting the tables, and then by subtracting 1 for every year afterwards.

[txdd]

Appleby,

So would you agree that the wording in Pub 590 is misleading (dead wrong ???) for spouse beneficiaries?

I know IRS publications are not the final word on anything, but it would still be nice if they had the correct info.

[Appleby]

I will opt for incomplete and therefore misleading. While it mentions when a spouse beneficiary should begin distributions, it failed to provide the calculation method used by the spouse. This would cause one to incorrectly assume that the option for both spouse and non-spouse beneficiaries is non-recalculated.

[Guest JulieT]

I definitely need clarification with this rule. I will inheriting my father's IRA this year. He passed away 2001. I will be 45 years old (in 2002) when I have to begin taking distributions based on my life expectacy from this Beneficiary IRA.

Acording to the Ordinary Life Table--One Life--Applicable Life Expectancy Divisors---written by "Barry Picker's Retirement Planning Guide"-------my divisor at age 45 is 37.7 in the year 2002 to determine my minimum disbursment from the inherited IRA So in the year 2003 my life expectancy divisor will be 36.7---35.7 in 2004 and so on.... Am I getting this right?!

If so ---from now on I will always have to remember my starting point (37.7) in the year 2002 and reduce the divisor by 1 each year. I may have to have that tatooed!

Second concern........

I am in the process of insuring that my father's MRD for the year 2001 will be disbursed before 12/31/01. This was not done before his death. I know that this must be done otherwise IRS penalties are 50% of the amound that should have been disbursed.

Here is my concern.... the Custodian of the IRA is requiring that the IRA be split between the 2 beneficiaries (myself and my brother) and a IRA beneficiary Distribution account be set up before my father's MRD is disbursed. How is the IRS going to track and know that the MRD was taken out this year as required?

How, where, what line--- do I report this distribution on MY own tax return? (It is not my IRA distribution even though I will be responsible for the income and taxes that the disbursement generates. How do I report (if I need to) on my father's final tax return so that the IRS knows the MRD was taken care of?

I appreciate any help!