Improper rollovers.The Tax Court ruled for the first time that cash distributions from IRAs and Keogh retirement plans must be rolled over as cash (not property) to another IRA Ira, in the Bible Ira (ī`rə), in the Bible. 1 Chief officer of David. 2, 3 Two of David's guard. IRA, abbreviation IRA. within 60 days or the rollover will be taxed. If the cash is used to purchase stock or other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. that are then deposited in an IRA, even within the 60-day period, the entire amount of the cash distributions is taxable. In Albert Lemishow v. Commissioner (110 TC no. 11, 1998), the taxpayer had $492,950 in his Keogh and IRA accounts. He withdrew $480,400 (to cover the 20% withholding tax The amount legally deducted from an employee's wages or salary by the employer, who uses it to prepay the charges imposed by the government on the employee's yearly earnings. ) to pay the $377,900 purchase price of a stock deal he had signed. Within 60 days he opened a new IRA with a brokerage house and deposited his newly acquired shares into that account. The taxpayer did not report the cash distributions on his tax return. However, the IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. considered the withdrawals taxable and included the full $480,400 in the taxpayer's gross income. At issue is whether the cash distributions have to be rolled over as cash to a qualifying IRA for the rollover to be tax-free. Generally, IRA and Keogh distributions are included in gross income in the year received. However, IRC (Internet Relay Chat) Computer conferencing on the Internet. There are hundreds of IRC channels on numerous subjects that are hosted on IRC servers around the world. After joining a channel, your messages are broadcast to everyone listening to that channel. sections 408(d)(3) and 402(c)(1) allow tax-free rollovers if the money distributed from the accounts is transferred to a new qualified account. According to the Tax Court, the legislative history uses the term this same money. The court interpreted the laws strictly, concluding the distributions were taxable because they were used to purchase stock and then deposited into an IRA. Observation: The above result can be avoided by transferring money from IRA and Keogh accounts via trustee-to-trustee transfers and then having the new IRA purchase the stock. Not only are such transfers taxfree but they also avoid the 20% withholding requirement, the 60-day restriction and the one-year waiting period between IRA rollovers. Failed rollovers can result in a 10% tax on distributions prior to age 59 1/2 and a 6% annual excise tax on excess contributions. Finally, distributions from a nondeductable IRA contribution or a non-deductible employee contribution to a qualified plan are not included as income when received. --Michael Lynch, CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. , Esq., associate professor of tax accounting at Bryant College, Smithfield, Rhode Island Smithfield is a town in Providence County, Rhode Island, United States. It includes the historic villages of Esmond, Georgiaville, Mountaindale, Hanton City and Greenville. The population was 20,613 at the 2000 census. . |
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