L1: ending 72t
Hello, My birthdate is 6/20/1952 I started a 72T on 3/17/2007. Since I will be 60 in June and it will be 5 years in March I can then end my 72t. I have been taking monthly withdrawals.I was wondering if in January if I could take the entire distribution
for 2012 instead of the monthly distributions. Would this mess anything up and if I do that would I still be able torestart a montly distribution after March?
2011-11-10 15:46, By: Fajita, IP: [18.104.22.168]
L2: ending 72t
Assuming that your 1st withdrawal occurred on 03/17/2007, your 5-year period ends on 3/17/2012.
If it were my plan, I would continue to take the scheduled monthly withdrawals for January & February which should make a total of 60 monthly withdrawals. Then on 03/18 you can do what you want. I wouldn’t take anything more than the two months until the
2011-11-10 16:43, By: Gfw, IP: [22.214.171.124]
L3: ending 72t
You should consider your tax situation as well as your cash needs.
I agree with gfw that we would like to retain the flexibility by taking only 2 months of distributions by 2/28/2012. After 3/18 (or 4/1 to play it safer), you could take whatever you want whenever you want, or not take anything. Once you take it, it becomes
So if you took an entire year’s distribution, and then got a job, it could be taxe at a high tax rate. Our way you could take what you NEED as you go along, and control you situation from a tax standpoint as well.
2011-11-10 17:30, By: dlzallestaxes, IP: [126.96.36.199]
L3: ending 72t
My suggestion regarding only taking the 59th & 60th payments has more to do with “Arnold v. Commissioner”
and how the 5-year rule was intreprteted by the IRS & tax court. I lifted the following from Bill Stecker’s book,A Practical Guide to 72(t). Would the additional 10 months be considered a modification based occuring within 5 tax years as defined by Arnold
v. Commissioner? In my opinion, taking more than the 2 months isn’t worth the risk.
Arnold v. Commissioner….
The issue decided in this case was the precise definition of the phrase …the 5-year period beginning with the date of the first payment…Û The Arnold’s contended that 5-year periodÛ meant five calendar tax years as they had
taken five equal annual distributions in 12/89, 1990, 1991, 1992 and 1/93; thus spanning five tax years but only 38 calendar months.
The Arnold’s then took an additional distribution later in November, 1993, after Mr. Arnold’s 59 _ birthday contending that they had met the 5-yearÛ rule. The Commissioner contended that a literal interpretation was appropriate
in that any language referencing a tax yearÛ was absent in the IRC and that therefore a 5-year periodÛ that commenced with the first payment therefore defined a period from 12/89 through 12/94.
The tax court agreed with the Commissioner thus determining that: It is evident that the 5-year period in 72(t)(4) closes at the end of 5 [calendar] years from the date of the first distribution. It does not end
on the date of the 5th annual distribution…Û. Thus, the extra distribution in November, 1993 constituted a modificationÛ which therefore disallowed all the distributions from 12/89 through 1/93 and imposed the 10% surtax plus interest.
2011-11-10 17:57, By: Gfw, IP: [188.8.131.52]
L4: ending 72t
I believe that the problem with the court’s wording, and attorneys in general, is a complete disregard for the English language. A CALENDAR YEAR goes from 1/1 to 12/31. FISCAL YEARS go from any other day, such as 2/1/2011 to 1/31/2012, or even for a SEPP
72-T from 2/15/2011 to 2/14/2012. In this regard, common sense and usage would make the term “year or years” equivalent to “fiscal years”, not “calendar years”. I believe that this is the main reason for so many attorneys and courts — they cannot write nor
speak so as not to be misunderstood.
2011-11-10 18:06, By: dlzallestaxes, IP: [184.108.40.206]
L5: ending 72t
Dlz… I don’t disagree. The definition of the 5-year period doesn’t really make sense and perhaps it would have been better had it been called something other than a calendar year. However the definition has been around for over 10 years and no
one has challenged it.
I have always looked at Arnold v. Commissioner to say when using the 5-year rule, one should take no more than and no less than 5 time the calculated annusl distribution. This is the situation where I also don’t believe the 3 normal options (all, pro-rata
or none) come into play.
2011-11-10 18:16, By: Gfw, IP: [220.127.116.11]