What is the definition of 59.5?

[Guest Fishchick]

We have a client who turned 59 June 5 of 2001 and then December 4 of 2001 he took a distribution. We coded the 1099-R a 1, and his accountant claims it should be a 7. His accountant claims the six months is counted in days, and not the date of the month.

We advised the client that if the accountant wants to change the code, file 5329, but we would not change it. Does anyone know if there is a statuatory or regulatory definition of age 59.5, and if so can you give me a reference?

Also, are there any PLR's that might shed some light?

[mbozek]

I have always advised clients to take the distribution on the day after they are age 59 and 6 months to avoid any problems. E.g employee turns Age 59 on January 2 then age 59 1/2 is attained on July 2 so a distribution can be taken on July 3. I dont know of any plrs that calculate how the 6 mos is calculated. But 182 days could be less than 1/2 of a 365 day year.

[Guest Fishchick]

I agree on 182 days being less than half a year, but if you count the 5th, it's 183 (this is their story). Of course, I would have told him to wait until the 6th too, but noone asked me at the time!

[mbozek]

I dont know of any way to include the day the event occurs. I have always understood that the birthday (6/5) is not included because that is the day the employee attains 59. Is an person 59 years and 1 day on his 59th birthday??? Therefore, the 6 mo period begins on the next day. However why not take an audit position based on the accountant's position. -- after all worst case is that the IRS would fine the plan for an incorrect 1099 form and may not if there is no authority for determining how the 6 mo is determined.

[Guest Fishchick]

Well, Mbozek, maybe if it's a leap year LOL! Of course, then the birthday would have to occur before Leap Day! Tee Hee.

[MGB]

Assuming there is no IRS position on this (however, I think there is one out there), one could look at other federal agencies and how they define age. For example, the SSA has very defined methods for determination of age for SS benefits.

They define age as the day before your birthday. I.e., if the birthday is June 5, then you became 59 on June 4.

As for counting days versus using the day of the month, I seem to recall the IRS using the day of the month for 1/2 years in some pronouncement out there.

[Guest franky]

According to Reg. 1.401(a)(9)-2, A-3, Referring to when an individual reaches age 70 1/2, it is measured in calendar months, not in days.

[JAMES PATRICK]

In the H & R Block course titled Retired Taxpayer, which is given to their employees, it states that an individual born on June 30th is 70 1/2 on December 30th. An individual born on July 1st is 70 1/2 on January 1st. Not that Block can't be wrong but they do a very good job on their training and copy much of it from IRS regs, pubs, etc.