2001 plan, IRS exam

L1: 2001 plan, IRS examI wish I had found your site earlier!!!
Just received an examination report for 2003 from the IRS for $5,000 on a $60,000 distribution. (I had reported the $60,000 as an IRA distribution. This is additional taxes, other taxes۝ over and above the normal taxes paid. I noticed it was not 10%?)
I have been distributing $60,000 per year since 2001 when I was 55. The 5th and last distribution was this year when I turned 60. Total IRA assets were $584,000 in 2001. Since the regulations have changed, I have been trying to reconstruct mycalculation for the $60,000 annual distribution. Using the UP1984 and 80CNSMT mortality tables, I get 22.7 years. Using 8% interest I get a maximum allowable distribution of $60,500. Am I on the right track? Any advice would be appreciated!
Thank you2005-12-23 11:05, By: tedtax, IP: [141.154.39.40]

L2: 2001 plan, IRS examReconstruction can be difficult – especially when trying to back into the numbers. If you are planning on justifying the 8% rate, make sure that you check the 120% AFR Long Term rate for the month distributions began.
If the rate wasn’t near 8% you may have real problems justifying the use of 8%. And, if the payment should have been 60,500 and you only took 60,000 you still have problems – a $10 variance might be ok, but not $500.
How was the payment originally calculated? Do you have anything in writing?
I would start by contacting either the individual who did t he original calculations or your curretn tax advisor.
2005-12-23 11:53, By: Gfw, IP: [172.16.1.72]

L2: 2001 plan, IRS examUnfortunately I have nothing in writing. However, this occurred in 2001 before the 2002 rules on mortality tables and interest rates. Thus, I don’t know if the interest rate restrictions were quite as strict.
I did not use a tax advisor.
The IRS did not examine 2001 through 2002. Perhaps the better part of valor is to just accept the 2003 bill if I can’t make the numbers work? 2005-12-23 12:01, By: tedtax, IP: [141.154.39.40]

L2: 2001 plan, IRS examThe interest rate rules have always (even before 2002) somewhat strict.
Where 2002-62 limited the maximum to 120% of the mid-term rate, the generally accepted maximum before 2002-62 was equal to 120% of the long-term rate for the month the first distribution occurred.
And while certain PLRs used an 8% (or whatever) fixed rate, you had to look beyond the rate to the actual prevailing interest rates when the PLR was applied for.
Good luck!2005-12-23 12:35, By: Gfw, IP: [172.16.1.72]