Account balance to be used
L1: Account balance to be usedHi, I have read over the 72T subject matter contained on the website, appreciate it the content for helping get me started. My question is about account balance to use for my plan. My birthdate is 10/14/1959 and I would like to initiate a 72T plan using the fixed amortization method with a balance of 850,000. I realize I may use the interestrate of 2.31 if I begin that plan by december 31, 2013 and if i begin in January 2014 that interest rate will be 2.07. If I commence with the plan sometime in december 2013, must I use the account balance from december 31, 2012 or canI use any balance up to my distribution date? Thanks.2013-11-06 17:47, By: Bob, IP: [22.214.171.124]
L2: Account balance to be usedFrom REV ruling 2002-62
(d) Account balance. The account balance that is used to determine payments must be determined in a reasonable manner based on the facts and circumstances. For example, for an IRA with daily valuations that made its first distribution on July 15, 2003, it would be reasonable to determine the yearly account balance when using the required minimum distribution method based on the value of the IRA from December 31, 2002 to July 15, 2003. For subsequent years, under the required minimum distribution method, it would be reasonable to use the value either on the December 31 of the prior year or on a date within a reasonable period before that year’s distribution.
Make sure to read all the planning pointers and info on the home page.slemers2013-11-06 18:25, By: slemers, IP: [126.96.36.199]
L3: Account balance to be usedThanks for your reply Slemers. Is there any chance the revenue ruling only applies to RMD distributions – I had read this ruling on the website as well but because it only references that method specifically I wondered if it would apply in my case using fixed amortization method.2013-11-06 18:38, By: bob, IP: [188.8.131.52]
L4: Account balance to be usedIt applies to all three methods. Just make sure that the balcance that you use is a reasonable representation of the actual account balance and make sure that you save a statement that shows the balance used and the date.
If 850,000 is reasonable, then use it. One the other hand, if the account is only worth 800,000 and you use 850,000 you may be cfreatuing a potential problem. 2013-11-06 18:44, By: Gfw, IP: [184.108.40.206]
L5: Account balance to be usedWhile I agree that you must use a “reasonable representation of the actual account balance”, I believe that it also should be based upon a date closer than 10 months ago.
I would select a date no more than 6 months ago, and usually as of a month-end because you get monthly statements. I’m sure that you can find a balance that comes close to the balance necessary to generate the annual/monthly amounts that you need.
If possible, I would use the highest balance during the 4/30-10/31 time period, and then transfer the excess over the amount that you need to a separate account to use for future emergencies, or a 2nd SEPP 72-T in the future.2013-11-07 01:18, By: dlzallestaxes, IP: [220.127.116.11]
L6: Account balance to be usedI agree with DLZ on using a much closerbalance to the plan start date, (which is what the “reasonable balance” intends to mean as I see it)and I want to clarify that it needs to be a balance you can prove later if ever asked by IRS (by pulling out the hard copy showing that total$$ value on a statement of that IRA) so keep that in your SEPP documentation. In addition, make sure that if you want 2 IRA’s, you must move the money not needed for the SEPP plan into a 2nd IRA before you establish that starting balance figure (and get the printout of same for your records) on the original IRA, since no money can be removed from the IRA that is used for the SEPP calcs once you have chosen that starting balance, other than for the periodic withdrawals, so this is slightly different from what is mentioned in DLZ’s last paragraph.2013-11-07 03:56, By: Ken, IP: [18.104.22.168]