COMPREHENSIVE ARTICLE EXPLAINING SEPP 72-T

L1: COMPREHENSIVE ARTICLE EXPLAINING SEPP 72-TPPC (Practitioners Publishing Company) issued a “TAX ACTION MEMO” (TAM-1218)on 5/8/2007 entitled “ANNUITIZINGIRAs FOR PENALTY-FREE EARLY WITHDRAWALS”. It is an excellent 4-page summary describing the “3 IRS-APPROVED METHODS FOR CALCULTING SEPP 72-T PLANS”, and also the “ONE-TIME SWITCH TO MRD METHOD IS ALLOWED”. Interestingly, it also discusses “OTHER SEPP CALCULATION METHODS MAY BE ALLOWED TOO”, which mentions 3 IRS Letter Rulings (200432021, 200432023, and 200432024) which are in addition to the “safe-harbor” provisions of Rev. Ruling 2002-62.
2007-05-24 11:18, By: dlzallestaxes, IP: [151.197.207.246]

L2: COMPREHENSIVE ARTICLE EXPLAINING SEPP 72-TRight, those PLRs are among those listed on this site under PLRs of interest. However, the more moving parts there is to the plan, the more the risk of critical error is increased.2007-05-24 18:40, By: Alan S., IP: [24.116.66.98]

L2: COMPREHENSIVE ARTICLE EXPLAINING SEPP 72-TSome people look at annual recalculation as a different method. It is really a modification of an existing method since you have to start with either the annuity or amortization methods before you can do annual recalculation and then the annual recalculation is done using the same method with variable that change every year.It would be possible to come up with a ”new” method that would be different than the three authorize methods, but as far as I know, the IRS has never approved anything beyond the three basic methods outlined in 89-25 and 2002-62.
2007-05-25 04:06, By: Gfw, IP: [24.148.85.129]

L2: COMPREHENSIVE ARTICLE EXPLAINING SEPP 72-TInterestingly, all three of the PLRs mentioned (and there are another 1/2 dozen or more very similar in nature) are “annual recalculation” PLRs and all are very consistent with the Service”s postion going all the way back to 2000 when it issued an Information Letter on this subject.
Furthermore, my recollection is that all of these PLRs use the same critical setence: “The taxpayer has adopted the FIXED amortization/annuitization methodology ELECTING to annually recalculate the values….” So, clearly the Service sees annually recalculated plans as sub-methodologies of the standard fixed amortization/annuitization methodologies as opposed to new or different methodologies of their own.
Thereore, interestingly, a taxpayer could adopt an annually recalculated amortization plan and still preserve their ability to switch to the RMD method, most likely to materially reduce future plan year distributions.
TheBadger
wjstecker@wispertel.net
2007-05-25 05:14, By: TheBadger, IP: [72.42.67.66]