on series of substantially equal payments now, wants to change- conseq

[maverick]

Fifty year old client rolled large 401k dist to IRA and is now taking a series of payments (about 45k per year). So far, she has taken 2 annual payments. She now needs 50k to buy a business. I think there was a discussion thread on the consequences of changing the amount of payments, but I can't find it, so I'd appreciate comments on the following:

- Already took 45k in 2002, draws another 50k: Is the 10% exception gone for 2002 and/or prior years?

- Future years: Assuming she takes the extra 50k in 2002, can she revert back to 45k in 2003 and forward?

- What about setting up a 401k plan, rolling 100% of the IRA into it, then taking a participant loan for 50k? Would this "cancel" the 10% exception on 2002 and prior dists?

Thanks all. Maverick

[BPickerCPA]

Taking the additional distribution this year will destroy the payout scheme and subject all distributions to the 10% penalty. There is also an additional amount to compensate the govt for interest on the prior years' penalty. Once done, you can always set up a new scheme next year, but you cannot just go back and continue the old scheme as if nothing ever happened.