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Rethinking a break on lump sums

March 17, 2013

Taking advantage of the special tax break for net unrealized appreciation on lump-sum distributions from a retirement plan most often was a fairly simple decision, but given all the tax changes that took effect at the dawn of this year, that...

Take a fresh look at Roth conversions

February 17, 2013

Now that we finally know the tax laws for this year, it is time to sit down with clients and re-evaluate their financial and tax plans. Some may be relatively unaffected by the American Taxpayer Relief Act of 2012, while others may require adjustments....

Qualified charitable distributions return

January 20, 2013

As expected, Congress has renewed the special tax break for charitable individual retirement account rollovers, known as qualified charitable distributions. QCDs apply only to IRA owners and beneficiaries 701/2 or older who make a direct transfer...

Roth 401(k) switch is a good deal for younger taxpayers sitting on cash

January 6, 2013

The Senate's decision to lift restrictions on Roth 401(k) conversions will be a boon to select individuals — those who can afford the tax bill now and whose employers have a Roth plan in place. A key to the American Taxpayer Relief Act of...

Sandy could blow through IRAs

December 9, 2012

Hurricane Sandy's pummeling of the Eastern U.S. caused more than $50 billion in damages, according to some estimates. Unfortunately, many of those affected by the storm could be about to exacerbate their situation by making costly financial...

Pay attention to charitable IRA rollovers

November 11, 2012

ualified charitable distributions haven't yet been reinstated for this year, though Congress may do so, as it has in the past. QCDs are a tax benefit for charitably inclined individual retirement account owners or beneficiaries. The QCD provision...

The $300,000 beneficiary form blunder

October 14, 2012

Stepchildren might not have the same legal standing as biological children if beneficiary forms don't make that clear. In a recent case, the 5th U.S. Circuit Court of Appeals ruled that a plan administrator didn't abuse her discretion in concluding...

Deadline for Roth conversions is near

September 16, 2012

For clients who made Roth IRA conversions last year, Oct. 15 is the last day that they can undo those conversions via a Roth re-characterization. If the value of the Roth individual retirement account has declined substantially, it often makes...

Not all disasters are equal, taxwise

August 19, 2012

Hurricane season is here, but not all hurricanes are alike, according to the Tax Court. In a recent case (Carter v. Commissioner, T.C. Summ. Op. 2012-33, April 17) the court ruled that a couple owed the 10% early-distribution penalty for a withdrawal...

Navigating the 2013 investment taxes

July 15, 2012

Taxes on investment income next year are just one part of the Patient Protection and Affordable Care Act of 2010 that was upheld by the Supreme Court. For certain clients, the crucial change will be the 3.8% surtax on investment income (interest,...

Why IRAs aren't the same as 401(k)s

June 17, 2012

You would think that an attorney would know that an individual retirement account isn't a 401(k), but Young Kim didn't and it cost him dearly. Here are the facts in the case. In 2005, at age 56, Mr. Kim left his job as a partner in a law firm....

A case of two wives and one pension

May 13, 2012

Consider the case of a man who named his wife as the beneficiary of his union pension but never told anyone that he had a first wife whom he never divorced. Here's the question: Which wife gets the money? Before we get to the answer, let's look...

When an IRA deduction is denied

April 15, 2012

In a recent Tax Court case, a taxpayer's $5,000 IRA deduction was disallowed because she and her husband were active participants in company retirement plans, and their joint income exceeded the limit to be able to deduct her IRA contribution....

Paying the Roth conversion tax

March 18, 2012

Certified public accountants across the country who are preparing 2011 tax returns are seeing clients who don't have the money to pay the first half of the 2010 Roth conversion tax now due. As a result, they need options to present to their...

Neither a borrower nor a lender be

February 26, 2012

In order to enjoy an IRA's tax-deferred growth, its owners must abide by certain rules. One of those rules is that they must avoid engaging in what are known as prohibited transactions. All such transactions carry the same severe tax consequences:...

When decisions are impaired by disability

January 22, 2012

In following self-imposed restrictions on her IRA distributions, a bipolar investor recently learned from the IRS that her actions would not cause any adverse tax consequences. Here's the story: “John” and “Jane” got divorced, and as part...

When a mom raids her child's IRA

December 11, 2011

In an unusual private-letter ruling, the Internal Revenue Service recently allowed a 13-year-old beneficiary of her father's company plan assets largely to undo a previously taxed lump-sum distribution and transfer the distributed plan funds...

A fraud warning for self-directed IRAs

November 13, 2011

In September, the SEC issued an investor alert warning investors to be wary of fraudulent promoters targeting self-directed IRAs. The alert began with a brief overview of conventional individual retirement accounts and self-directed IRAs, and...

More the exception than the rule

October 16, 2011

Recently, the Tax Court ruled that a taxpayer's continuing business activities and lack of credible evidence failed to qualify him as disabled under the tax code, and he was therefore subject to the 10% penalty on retirement account distributions...

IRAs and special-needs trusts

September 18, 2011

In a recent private-letter ruling (PLR 201116005), the Internal Revenue Service allowed a disabled beneficiary to transfer his share of two inherited individual retirement accounts to a special-needs trust of which he was the beneficiary. The...

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