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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...

Roth re-characterization confusion

August 21, 2011

Recent market volatility exposed a basic misunderstanding by financial advisers and even certified public accountants of the mechanics of undoing Roth conversions, a process called a Roth re-characterization. You will need to know how this works...

Broken window: Rollover horror stories

July 17, 2011

When clients withdraw money from an individual re-tirement account or employer retirement plan and want to move those funds to another retirement account, they must roll over those funds within 60 days of the date that they received the distribution...

Five considerations for Roth redos

June 12, 2011

Just as 2010 may have been the year of the Roth conversion, 2011 may be the year of the Roth re-characterization. Some clients had sticker shock after seeing the tax bill on their 2010 Roth conversions and want to undo those conversions. That...

401(k) rights trumped by ERISA

May 15, 2011

In a recent case (Cajun Industries LLC v. Robert Kidder, et al.), the court ruled that despite having previously named his three children as beneficiaries of his 401(k) plan, a deceased plan participant's 401(k) balance will pass to his new...

Defining the 'professional' trader

April 17, 2011

The Tax Court recently ruled that a taxpayer who made just three trades in 2005 didn't qualify as a “professional trader” that year. As a result, the income from his investments wasn't considered compensation and he was ineligible to receive...

Reporting Roth IRA conversions

March 20, 2011

Get ready for an avalanche of Form 8606 questions. The form, for non-deductible IRAs, is the one on which your clients will report their Roth conversions. Although this form has been around for years, this year it will be more popular than ever...

Your 2011 Roth IRA questions answered

February 20, 2011

Last year, many financial advisers worked with clients to implement Roth conversions. Now that we are beginning tax season, advisers should be ready for some new tax-related questions about 2010 and 2011 Roth individual retirement accounts....

A valuable late-year IRA extension

January 23, 2011

The Tax Relief Act of 2010 includes an extension of the qualified-charitable-distribution provision retroactive from Jan. 1, 2010, through Dec. 31, 2011. Because it was passed so late in the year and taxpayers wouldn't have much time to plan...

A year-end checklist for IRAs

November 21, 2010

In the rush of year-end activity, it's important not to forget your IRA-related to-do list. The following are some of the most overlooked year-end items. RMDs. Required minimum distributions were suspended in 2009 but are back for 2010. Most...

Law creates more options for Roth rollovers

October 24, 2010

The Small Business Jobs Act of 2010 includes a provision that allows certain 401(k) and 403(b) participants to convert their plan funds to a Roth 401(k) or Roth 403(b) within the plan. Not all employees are eligible, though. The new provision...

Dangers in using IRAs for business startups

September 26, 2010

When the Internal Revenue Service names a transaction “Robs,” that can't be good. The acronym tells us how unfavorably the IRS views these “rollover as business startup” transactions, especially if they appear to be designed to sidestep...

Avoiding Roth recharacterization traps

August 29, 2010

The Roth recharacterization provides one of the few second chances in the tax code. In essence, it's a do-over. The provision allows you to undo, or reverse, a Roth conversion, effectively treating the move as if it never happened. Any tax paid...

Ed Slott: Turn lemons into Roth conversion cash

July 25, 2010

If your client wants to convert his or her individual retirement account to a Roth IRA this year but doesn't have cash from non-IRA sources to pay the tax on the conversion, consider looking at his or her capital assets. Many clients have significant...

Avoiding a big Roth conversion mistake

June 27, 2010

There is a downside to a Roth IRA conversion. Whether clients pay tax for 2010 or spread the tax burden between 2011 and 2012, they'll still owe income tax on the pretax money they move from a traditional individual retirement account or company...

Having the conversion conversation

June 6, 2010

Although the Roth conversion isn't for everyone, financial advisers must have the conversion conversation with every client who qualifies. If you aren't discussing conversion now, you can bet that some other adviser is. In helping clients decide...

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