L1: ira transferI am taking payments via 72t from an exisiting IRA. Can I transfer part of that IRA to another custoidan and continue the 72t payments from original IRA without penalty?2010-09-16 15:17, By: gcapa, IP: [22.214.171.124]
L2: ira transferIt is not advisable at this time. Search this website for “PARTIAL TRANSFERS”, and the IRS ruling against them.
I received a call yesterday from the office of the NATIONAL TAXPAYER ADVOCATE, Nina Olson, in response to my e-mail about the IRS position.
IRS is basing its position on the fact that a SEPP 72-T is a “trust”, and under 401(a) the IRS says that ANY PARTIAL TRANSFER is deemed to be a MODIFICATION, and thereby “busts” the plan. The Taxpayer advocate said that they will discuss this with the IRS, and see if they can get a clarification based upon our concerns.2010-09-16 15:31, By: dlzallestaxes, IP: [126.96.36.199]
L3: ira transferDLZ, thanks for your efforts here, but I don’t see that the info they are giving her is any more conclusive than what Bill Stecker received, assuming we are referring to PLR 2007 20023.
Sec 401a is very lengthy, but I could find no reference anywhere in 401a to either partial transfers or to SEPP plans. Granted, IRAs are trusts, but they can be aggregated for RMDs and for basis assignment under Sec 72 whereas employer plans cannot. Many parts of 401a are restricted to employer trusts and are not applicable to IRA accounts. Any chance of getting a specific 401(a) subsection from her?
Now, if we all are just missing the point the IRS is trying to make, and if they are confident they are correct, I wonder why we only have one or two rulings about partial transfers, when thousands of SEPP participants have been doing these partial transfers for many years?
I also fail to see their concern with partial transfers when they allow full transfers of IRA accounts and even Roth conversions. But full 72ttransfers to a different type of plan are modifications, eg 401k to IRA, IRA to 403b, etc. This makes sense because none of those plans can be aggregated with IRAs in any sense, and therefore we have always interpreted disallowed transfers as being those between different TYPES of retirement plans (TIRA to Roth conversion excepted).2010-09-16 20:00, By: Alan S., IP: [188.8.131.52]
L4: ira transferI agree with you. ( Please, don’t shoot the messenger.)
I’ll see what happens before I contact them again.2010-09-16 20:12, By: dlzallestaxes, IP: [184.108.40.206]
L4: ira transferIf they are indeed considering it as a separate trust as David indicates, then they must be using a strict interpretation of Rev. Rul. 2002-62, Section 2.02(e)(ii)[any nontaxable transfer of a portion of the account balance to another retirement plan] and they are treating any IRA outside the current IRA as another retirement plan.
It is interesting that while it addresses partial transfers, couldn’tthey also consider a full transfer ans a 100% portion?
While it doesn’t help existing SEPP plans, any new plan that is established should be set up under a custodial type account and 99% of any transfer problems would be eliminated as the IRA would always remain intact regarless of where the investments are placed.
2010-09-16 20:16, By: Gfw, IP: [220.127.116.11]
L5: ira transferYes, Gordon.
Possibly the IRS is applying “a portion” to mean only a partial, rather than meaning “all or part of” the account. That might explain why full transfers have not been a problem. But then it might appear that you could do a full transfer between any number of plan types, while we always considered that even total transfers were limited to the IRA universe.
The Revenue Ruling Section you quoted is the only explicit statement I am aware of regarding transfers within a SEPP plan. And even here, the term “portion” raises questions.
2010-09-16 21:48, By: Alan S., IP: [18.104.22.168]