72t Divorce

L1: 72t DivorceWhat do we do for a client on a 72t who has just been divorced and his wife will receive 25% of the SEPP assets? Do we recalculate his 72t and if so, how? 2006-08-22 09:27, By: Andy, IP: [69.53.78.183]
L2: 72t DivorceAt the current time it is an open question. There were several PLRs issued prior to Rev.Rul. 2002-62, but none since. Depending on the dollars involved, you may want to consider getting a PLR – expensive, but then so isa mistake.
If the asset disposition isn”t final, try using other assets for the wife.
2006-08-22 10:37, By: Gfw, IP: [172.16.1.73]

L2: 72t DivorceHere”s an alternative. Try to get the parties together to change the terms of the split. Point out the problems and see if the wife will accept periodic payments until the 72(t) requirements are satisfied, and then take her 25% split. In the long term this could mean more money for her when the IRA can be split without penalty.
Jim2006-08-22 13:13, By: Jim, IP: [70.184.2.72]

L2: 72t DivorceAre you saying that when the IRA is split, they (he) will automatically be in breach of the 72t and be penalized from his start date?2006-08-22 13:24, By: Andy, IP: [69.53.78.183]

L2: 72t DivorceI believe the answer to your last question is the “open question” Gfw is referring too. Please re-read Gordon”s response and then re-read my response and then decide your course of action.
If you are not a CPA or tax attorney, then you might want to find one or both who are well versed in the divorce aspect of 72(t). In any case, try to encourage the parties to hold off going “final” until this issue is resolved.
Jim2006-08-22 14:31, By: Jim, IP: [70.184.2.72]

L2: 72t DivorceHello Andy:
I have actually researched this question indepth to provide expert witness testimony on the subject. Results:
1. The letter of the law says that when the 25% of the IRA goes from husband to wife it is a modification; therefore the 10% surtax plus interest applies.
2. One above does not logically feel good, but there is no contrary opinion or authority so either live with #1 above or file for a PLR.
3. In my case, we dodged both 1 and 2 above and the expenses associated with each by waking up the judge and opposing counsel to the issues and causing, as others also suggested, that some other asset(s) be used to transfer to the wife leaving the SEPP IRA untouched.
TheBadger
wjstecker@wispertel.net
2006-08-22 17:05, By: TheBadger, IP: [72.42.67.4]

L2: 72t DivorceDid some ruling negate PLR 200050046, or is it just considered moot because it is only a PLR?2006-08-22 19:46, By: Alan S., IP: [24.116.68.91]

L2: 72t DivorceHello Alan:
I don”t think PLR 200050046 is moot; nor are the three or so other PLRs on divorce that were issued in the 1998 – 2000 era. The problem is Revenue Ruling 2002-62; issued after all if these rulings contains the language that causes any non-taxable transfer of a portion of the IRA to another plan to be considered a “modification”. I think this is an “unintended result” issue of the ruling; however, no one subsequent to the ruling has stepped up to the plate to solve the question.
TheBadger
wjstecker@wispertel.net

2006-08-22 21:28, By: TheBadger, IP: [72.42.67.4]