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ira loan

L1: ira loanHi,
I recently heard that one is allowed to take a loan from their ira once a year and it must be paid back in 60 days. Can this be done if you are taking sepp payments from the ira?
If this is ok, is there any specific jargon, ie., tax coding, etc.,needed when requesting the loan from the administrator/broker.
thanks for your help-
bjm
bmor@indy.net2003-05-26 09:39, By: bj, IP: [127.0.0.1]

L2: ira loanHello bj:
Loans from qualified plans are permitted under certain conditions. An IRA is NOT a qualified plan; therefore, loans, per se are NOT permitted.
However, you may perform a once-a-year rollover from an IRA which must be re-contributed within 60 days or it becomes a taxable event. Now, whether you can do a rollover from an IRA that has a SEPP plan in effect is questionable:
1. If the SEPP plan began before 1/1/03; I would say the rollover is probably okay as there was no statutory provision to the contrary.
2. If the SEPP plan began after 12/31/02, I would say NO because RR 2002-62 specifically prohibits these rollovers. Admittedly, the language in RR 2002-62 is vague as to its intent and appears to be in direct conflict with IRC 408(d) which creates the ability to do a rollover; I would not tempt fate here.
TheBadger
wjstecker@wispertel.net
2003-05-26 09:50, By: TheBadger, IP: [127.0.0.1]

L2: ira loanBe very careful. If you take possession of the money, the trustee is required to withhold 20% taxes, even if you are going to roll into an IRA. If you roll it over, you’ll need to come up with the 20% taxes – you’ll get a refund of the taxes in next years tax return. If you don’t pay back the 20%, it becomes a distributiuon and you’ll pay another 10% penalty. If this IRA was a SEPP I imagine that you’ll also have to pay a 10% penalty plus interest on what you’ve taken out so far.
Just to be safe, I’d avoid taking loans and never take possession of the money.2003-05-26 13:32, By: woolybully, IP: [127.0.0.1]

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