72(t) Dist. and ad hoc dist.
L1: 72(t) Dist. and ad hoc dist.Good afternoon.
I have a client who is currently receiving a 72(t) distribution.
He is receiving $900.00 per month.
He is asking to continue the $900.00 per month as well
as take an additional $1,800 additional one time distribution.
He is also requesting to rollover half of his account to and IRA
at the local bank so he can purchase a CD in an IRA there.
The IRS website is not clear on the ad hoc distribution and his
CPA is on vacation.
Any guidance will be greatly appreciated.
Thank you.2009-11-09 22:03, By: Ed, IP: [188.8.131.52]
L2: 72(t) Dist. and ad hoc dist.You don’t mention the reason for the extra $1,800 distribution. Ifthe extra distributionmeets one of the other penalty exemptions it “may” be OK. If not, he busts the plan and owes the 10% penalty tax on all previous distributions.With regards to the CD, the IRS has previously ruled plans busted who did partial transfers/rollovers. Their logic in making the decisions wasn’t totally clear (or even perhaps proper), but it must be considered.With thatsaid, if he is in a brokerage/custodial account he can probably purchase the CD through the current account without any transfers or rollovers.2009-11-09 22:24, By: Gfw, IP: [184.108.40.206]
L3: 72(t) Dist. and ad hoc dist.The following link explains the ONLY IRS letter ruling to date that supports an “ad hoc” distribution. Even ifa client had the $1,800 in qualifying higher education expenses, no way would I risk busting a 72t plan for this small an amount and based on only one IRS ruling at odds with all prior findings in similar cases:http://www.retirementdictionary.com/news/sepp-not-busted-because-additional-distributionsAlso, it is interesting to note that the most recent busted plan PLR for a partial transfer also involved transfer of funds to a bank CD……………2009-11-09 23:43, By: Alan S., IP: [220.127.116.11]