... Effect of death.What would happen if all of the lump-sum distribution Lump-Sum Distribution A one time payment for the entire amount due, rather than breaking payments into smaller installments. Some lump-sum distributions receive special tax treatment. criteria criteria (krītēr´ē  ),n. were met except that the employee received partial distributions from the account during the year but died before the total balance was distributed? Unfortunately, the predeath distributions would not be eligible for lump-sum treatment since the employee's tax year would have ended on the date of death (under Regs. Sec. 1.443-1(a)(2)) when the employee's account still had a balance. Even if the beneficiary beneficiary Person or entity (e.g., a charity or estate) that receives a benefit from something (e.g., a trust, life-insurance policy, or contract). A primary beneficiary receives proceeds from a trust or insurance policy before any other. receives the account balance before his tax year ends (usually the calendar year), the predeath distributions would not qualify. This unfavorable treatment also could result in the imposition The printing of pages on a single sheet of paper in a particular order so that they come out in the correct sequence when cut and folded. of the Sec. 4980A 15% excise tax Excise Tax 1. An indirect tax charged on the sale of a particular good. 2. A penalty tax applied to ineligible transactions in retirement accounts. This penalty is assessed by and paid to the IRS. Notes: 1. on excess distributions in the decedent's final income tax return. However, the beneficiary may elect lump-sum treatment for the distribution of the account's remaining balance within his tax year. If an employee desires to assure lump-sum treatment, his account balance should be paid in full, and not in installments, in view of death's uncertainty. |
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