72T Distribution is running out of gas

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L1: 72T Distribution is running out of gasI am 50 and on a 72T distribution plan. My IRA is 100% in stocks. It was set up 5 years ago to earn 10% per year. It looks like it will be exausted before I am 59 1/2. IRS rules say that I would pay the 10% penalty for each year’s distribution and a “possible” interest penalty. My CFP said that he checked with a CPA and attorney and they said that there would be no penalty (interest or 10%). I find this hard to believe. Please advise. 2002-07-22 15:11, By: Sam, IP: [127.0.0.1]
L2: 72T Distribution is running out of gasYou and 100,000 others are in very similar circumstance. My literal reading of IRC 72(t)(4) says that the 10% penalty plus interest will apply if you exhaust your IRA before age 59 1/2; however, that’s not the end of the story.In very few instances has 72(t)(4) been interpreted & certainly this code section did not contemplate the delimma faced by many tax payers. As a result, we are in a grey area of the law; meaning that based upon one’s interpretation of the existing statutes; there is no law.The only way to get a “for certain” answer to this question is to request a private letter ruling & even then it will be determined by specific taxpayer circumstances.TheBadgerwjstecker@wispertel.net2002-07-22 15:35, By: TheBadger, IP: [127.0.0.1]

L2: 72T Distribution is running out of gasI am in total agreement with “The Badger”You might, however, have the CFP, Attorney and/or CPA (or even better, all three) put the statement in writing (if they are willing) and that would give you another possible avenue should they be “not quite right on their intrepretation” – maybe they would pay the penalty/interest for you!2002-07-22 16:30, By: Gfw, IP: [127.0.0.1]

L2: 72T Distribution is running out of gasAnd I am in agreement with Gordon (“Gfw”). I like the idea of getting your CFP/CPA/Atty to indemnify you. Needless-to-say, this would mandatorily need to be in writing.TheBadgerP.S. As a professional in this specific area of the law, even without your specific circumstances at hand, you would not get my John Hancock on a letter indemnifying you in an “account exhaustion” circumstance. 2002-07-22 19:09, By: TheBadger, IP: [127.0.0.1]

L2: 72T Distribution is running out of gasDoes anyone know of a private letter ruling that has been issued on the subject? I know there have been some but am unable to find. We all want this information, but our CPAs know nothing of it and many have never ventured into the private letter ruling arena and do not know what to say or what ot ask for. Any help would be appreciated2002-07-23 22:36, By: merrillst, IP: [127.0.0.1]

L2: 72T Distribution is running out of gasWith certainty, I can tell you that no PLRs have been issued/published on this issue. At this juncture, I have submitted one PLR and conversationally I am aware of approximately 4 others. However, the PLR process is a one-to-one relationship between the IRS & the taxpayer. As a result, the rest of us can get no information on the status of other PLRs and can get no info on the success/status of other PLRs until they are published; just like everyone else.Lastly, the publication of one or even two PLRs is likely to be noteworthy but of little value to all the rest of the people facing these circumstances as PLRs are only valid for the submitting taxpayers. In my opinion, it will take a 1/2 dozen PLRs or more on this subject to truely settle the issue; or, even better, a revenue ruling. Were I to guess, I don’t see this happening until next year.TheBadgerwjstecker@wispertel.net2002-07-24 08:02, By: TheBadger, IP: [127.0.0.1]

L2: 72T Distribution is running out of gasI have confirmed today that as many as 5 PLRs have been received by a company advising of IRS approval to reduce the 72t distributions. The request were based on current market conditions. I have contacted my congressman and requested they push for congressional support and the IRS’ immediate attention to the matter. Everyone should do the same2002-07-24 12:15, By: merrillst, IP: [127.0.0.1]

L2: 72T Distribution is running out of gasHow did you confirm?Do you have the PLR numbers or the issue dates?Do you a contact at the IRS who confirmed?I must admit that I also haven’t seen any PLRs issued on the subject.2002-07-24 12:38, By: Gfw, IP: [127.0.0.1]

L2: 72T Distribution is running out of gasI echo Gfw’s comments; how confirmed?Give us some PLR #’s or even the name of a firm that claims to have received favorable rulings.TheBadgerwjstecker@wispertel.net2002-07-24 13:56, By: TheBadger, IP: [127.0.0.1]

L2: 72T Distribution is running out of gasHere is where my experience runs short as I too am all to unfamiliar with PLRs. The person I spok with states that “as they are Private Letter Rulings, the are not available to the general public and we are unable to give you any details regarding the letters. We can confirm that we have received favorable rulings and adjustments have been made.” I will not disclose the company, but it is a major company that serves as IRA custodian. If you guys say there should be a number, I will call tomorrow and try to get. Just tell me specifically what to ask for.2002-07-24 18:30, By: merrillst, IP: [127.0.0.1]

L2: 72T Distribution is running out of gasAll PLRs are issued with a number, for example 200014024 – each carries an issue date. While there is a time lapse between the time that they are issued and the time that they are published, they are indeed, part of the public record and will eventually appear – with a number, any PLR issued can be pulled from companies like Westlaw.Call the company, tell them that you would like the PLR number(s) so that you can get the ruling(s) from Westlaw. Send me an email with the number(s) and I’ll get the ruling(s).2002-07-24 18:58, By: Gfw, IP: [127.0.0.1]

L2: 72T Distribution is running out of gasAs Gfw indicates, all PLRs are eventually published in the Cumulative Bulletin. Each PLR, on any subject, has a nine digit serial number of YYYYNNNNN. YYYY = 2002 & NNNNN is a sequential serial number; so the number will look like “200214589”. However, when a PLR is first issued, e.g. mailed, to the taxpayer, it does not have this number on it. Instead, a PLR, after it is issued to the taxpayer, goes to a redaction department. Their job is to redact all sensitive information in the PLR so that when we read it, it appears as “Taxpayer A had an IRA at institution Q with a 12/31/01 balance of Z dollars”; you get the picture. This department also serializes it, e.g. gives it the number & forwards it to the publications release people. For whatever reason, this whole process seems to take 4 – 8 weeks. Further, the IRS does not tell you what your public PLR number is. As a result, if you are interested, one must scan the PLRs as they are issued and compare the text of what you have in your hands to what you see in print; from Westlaw for example to know with certainty that your PLR which you received 6 weeks ago is now in the public domain and its number is 200214589. I know this seems a bit silly, but that’s how the system works.Many larger institutions; e.g. big accounting firms or law firms will redact & issue a PLR they have received on behalf of a client almost immediately either because the PLR is of material significance or they simply want to “take credit” for the PLR to their viewership.TheBadgerwjstecker@wispertel.net2002-07-25 08:35, By: TheBadger, IP: [127.0.0.1]

L2: 72T Distribution is running out of gasCan you give me a website to scan for when these PLR’s might be made public? Also, how can I get on a list to be notified if a recalculation ruling is made?2002-08-12 13:02, By: Keith, IP: [127.0.0.1]

L2: 72T Distribution is running out of gasAs I understand, this issue is at the top of the list for IRS consideration. It is an administration issue not a legislative issue therefore, IRS can address and make changes. Any changes should be soon in coming….2002-08-14 07:35, By: merrillst, IP: [127.0.0.1]