immediate annuity and 72t

L1: immediate annuity and 72tIf one buys an immediate annuity with life option, does the amount distributed qualify the distribution as a 72t even if the amount of the distribution is greater than what would be allowed using 120% of the FMTR and the amortization method? If I recall correctly, this issue was discussed some time ago on the site and the answer was yes as long as one purchased and annuity which was immediately annuitized rather than a defferred annuity which was annuitized at some future date. I made a copy of the info when it was on the site but lost it to water damage, hence my need to ask for help to see if my memory is correct.
Put aside the question of whether an immed. annuity is the best way to fund the IRA or not.2007-02-06 12:22, By: john, IP: [24.182.94.91]

L2: immediate annuity and 72tHello John:
Sorry to hear about your water damage disaster. Hope you didn”t live in the New Orleans area or suffered a similar fate.
If you buy an immediate annuity or annuitize a deferred annuity within one year of pruchase and use a lifetime settlement option, then you don”t have to worry about SEPP and the IRS is satisfied. The problem with using the deferred annuity option is the ability to annuitize before the completion of the first year. The IRS says you have to do that to qualify, but I don”t know of an insurance company that will let you annuitize a deferred contract any sooner than after the first year. Sothat”s the problem with using the deferred annuity.
Jim2007-02-06 12:54, By: Jim, IP: [70.184.2.72]

L2: immediate annuity and 72tJim-thanks for confirming my memory. A follow up question- since you would be buying an IRA Annuity custodialized by the Insurance company, would the distribution be considered a 72t as I think, or would it be a 72q? I am under the impression it would be a 72q only if you bought the annnuity with money not from an IRA or other qualified plan. In other words, if an annuity is in an IRA, the IRA rulestrump the annuity rules. Thanks again. By the way, is there a PRL or other source for the position we believe to be correct?2007-02-06 14:02, By: john, IP: [24.182.94.91]

L2: immediate annuity and 72tIt would probably fall under 72(t) since the annuity when issued will havea rider that will make it an IRA or through an IRA Custodial Account. For exact details you should check with the insurance company that issuesthe annuity.
If you have read past posts, then you also have probably read my feelings about purchasing a life annuity at about any age less than age 80. You are turning over the cash for a monthly income – unless the annuity has surrenderprovisions (which most don”t) you permanently lose access to the value. If interest rates go to 3%- all will be good. If interest rates go to 9% you may have second thoughts.

2007-02-06 15:24, By: Gfw, IP: [74.136.109.63]