What is the basis of the regulation language limiting the exclusion from AGI to IRA RMDs only?

[BeckyMiller]

The statute defining adjusted gross income for purposes of the Roth conversion privilege provides that AGI is calculated excluding required minimum distributions pursuant to IRC Section 401(a)(9). The final regulations, however, provide for the following:

1.408A-3, Q-6. Is a required minimum distribution from an IRA for a year included in income for purposes of determining modified AGI?

A-6. (a) Yes. For taxable years beginning before January 1, 2005, any required minimum distribution from an IRA under section 408(a)(6) and (b)(3) (which generally incorporate the provisions of section 401(a)(9)) is included in income for purposes of determining modified AGI.

(b) For taxable years beginning after December 31, 2004, and solely for purposes of the $100,000 limitation applicable to conversions, modified AGI does not include any required minimum distributions from an IRA under section 408(a)(6) and (b)(3).

This language does not say that RMDs of 401(a) plans may not be excluded. It is simply silent. Both the BNA portfolio series and CCH state that any RMD is excluded. But, I have seen many commentators who say that only IRA RMD's may be excluded.

So - what does this community think?

Thanks for any insight.

[mbozek]

See IRC 408A©(3)©(i)(II) effective 1/1/05.

[BeckyMiller]

But, that section refers to paragraph 5 of that section which refers to IRC Section 401(a)(9)(A) which covers IRAs and 401(a) plans. Hence, my problem.

[Belgarath]

When in doubt on these issues, I generally prefer a conservative interpretation of the regulatory language. Since it only specifies the RMD from IRA's, then I'd interpret it to mean that RMD's from other plans must be included in the AGI.

Does this make sense? Not to me. That's just how I read it.

[E as in ERISA]

The regulation is silent on qualified plan RMDs. So maybe it's just a clarification regarding IRAs. The statute seems to clearly exclude RMDs under 401(a)(9). But technically speaking, Sections 408(a)(6) and 408(b)(3) merely indicate that IRAs are subject to rules SIMILAR to 401(a)(9). So maybe the regulation is simply a clarification that the RMDs from IRAs are also excluded.

[mbozek]

IRC 408A©(5) cross references RMDS of IRAs under IRC 408(a)(6) and (b)(3). Under the revision to 408A©(3)©(i)(II) effective 1/1/05 the $100,000 AGI limit for a Roth conversion will not include RMDS from IRAs under 408(a)(6)and (b)(3) ("any amount included in gross income by reason of a required distribution under paragraph ©(5) shall not be taken into account for the purposes of sub para. (B)(i)"). There is no similar exclusion for RMDS from other retirement plans.

[E as in ERISA]

The Joint Committee on Taxation's explanation agrees with mbozek:

The provision amends section 408A©(3)©(i) to exclude

minimum required distributions from IRAs (but not distributions

from qualified plans) from the definition of AGI solely for

purposes of determining eligibility to convert from a

deductible or nondeductible IRA into a Roth IRA. Under present

and prior law, the required minimum distribution is not

eligible for conversion and is includible in gross income.

http://frwebgate.access.gpo.gov/cgi-bin/ge...id=f:52240.wais

[BeckyMiller]

Thanks to all.