MD Method Surprise From IRS

L1: MD Method Surprise From IRS
I contacted the IRS Taxpayer Assistance Center today at 1-800-829-1040. I asked about the conversion to the MD method based on Rev. Rule 2002-62. Mr. Walt, who I talked with, confirmed that I could change from the fixed amortization method to the required minimum distribution method. He said that I must use the “Uniform Lifetime Table” for the life expectancy number, which at 58 would be 38.7. The table is shown as Appendix A to rule 2002-62 when you download it from the IRS web site. The real surprise was when he told me that the MD method requires a minimum distribution each year but does not limit the distribution. The minimum must be taken each year until 59 1/2 or 5 years per 72t but that I could take more than the required minimum distribution if I choose each year. These answers followed a 30-minute hold while he met with the other representatives in the office to talk about my questions.
Does this make sense to you? If one can change to the MD method with the option of taking more than the calculated required -minimum each year so long as the minimum is met, then it seems like a no loose decision. He said that this information was based on an October 21 instruction to the IRS representatives at the Assistance Center.2002-10-28 22:48, By: dar, IP: [127.0.0.1]

L2: MD Method Surprise From IRSThe individual you talked to is pretty close to being right, but on the wrong subject. It appears that he has the post age 70.5 Required Minimum Distribution [RMD] rules mixed up with the Minimum Distribution rules for 72(t). Even then he wasn’t totally right about the use of only one table.
Lets start with what he told you about use of the Uniform Table. 2002-62, Section 2.02(a) clearly states:Life expectancy tables. The life expectancy tables that can be used to determine distribution periods are: (1) the uniform lifetime table in Appendix A, or (2) the single life expectancy table in 1.401(a)(9)-9, Q&A-1 of the Income Tax Regulations or (3) the joint and last survivor table in 1.401(a)(9)-9, Q&A-3. Clearly there are three possibilities, not just one -and our calculators perform all three.
Under the RMD rules, the payment is the minimum and you are allowed to take more. Under Section 72(t) it is both the minimum and the maximum amount – See Section 2.01(a) of 2002-62 -The annual payment for each year is determined by dividing the account balance for that year by the number from the chosen life expectancy table for that year. – Note the wording,annual payment – it doesn’t say the minimum payment, it clearly states theannual payment.
Revenue Ruling 2002-62 along with some of my comments can be found at this link ->http://72t.net/MN_ArticlesShow.aspx?WA=34
Next time you visit with the individual you talked to at the IRS, please invite him to browse this site.
2002-10-29 04:41, By: Gfw, IP: [127.0.0.1]

L2: MD Method Surprise From IRSThis is a duplicate reply to an earlier message so please ignore it if you have already answered the duplicate reply.

I talked with Michael Rubin, the principal author of 2002-62, regarding a conversion to the RMD method this year. He said that I could not convert to the RMD until January 2003 and must continue with existing withdrawals this year. He said that I could change if I was making one annual withdrawal or had taken out less than the RMD method but since I was taking monthly withdrawals and they have exceeded the RMD method, I could not change until January 2003. I asked him if he was aware of this web site and he said – No he didn’t know about it. Has Michael been involved with your Service contacts? The Service representatives seem to be very confused regarding what 2002-62 really implies as other representatives at the Service have given me much different answers.
I believe that you are correct with your interpretations but I remain hesitant to make the conversion if I risk the 10% penalty.2002-10-30 20:35, By: dar, IP: [127.0.0.1]