IRS Reply On PLR 2007-20023

L1: IRS Reply On PLR 2007-20023In late May, 2007 I submitted a rather lengthy General Information Letter (“GIL”) request to the IRS regarding the above ruling mostly becuase I think we were all concerned and confused on the whole subject of IRA transfers while a SEPP plan is running.
I have received a response from the IRS. To be blunt, I am dissatisfied with the response received in the extreme. I think the response has a noticeable barnyard odor to it very similar to B*** S***. Further, I am of the opinion that, although it took three months to get a reply, the IRS gave this request rather minimum treatment as measured by the brevity of their response.
Nonetherless, we sometimes have to work with what we are given. To that end, I have written an article / position paper which Gordon has kindly reformatted and posted to the Articles section on this website. I would encourage all to give it a read and maybe we can generate some discussion and/or maybe some one else will see something different in the IRS”s response than I do.
TheBadger
wjstecker@wispertel.net

2007-08-28 16:53, By: TheBadger, IP: [72.42.66.126]

L2: IRS Reply On PLR 2007-20023Thank you Bill for your efforts to address this critical issue.
I agree the lack of clarity from the IRS is amazing and I am surprised that they didn”t provide a response more characteristic of their style in dealing with items like this.
Perhaps it will take more instances of this situation for the IRS to rule on to get more clarity.
I am potentially one such candidate and I suspect there are many others listening on this forum. If necessary I would be interested in participating in a “class action” response to this issue should it come to that level of need, or even a PLR if am identified as a taxpayer who incorrectly followed the rules.
For what it is worth at this time, my SEPP expires on July 3, 2008 and I did not do annual recalculation.
In the meantime I guess all I can do is continue on with the plan.2007-08-28 21:04, By: John, IP: [71.208.223.52]

L2: IRS Reply On PLR 2007-20023I wonder if the verbiage relating to transfer of a portion to “another retirement plan” in 2002-62 is part of the problem with the IRS. The consensus has been that “another retirement plan” referred to a plan under another code section such as a 401k or 403b, but that Sec 408 (TIRA) and 408A (Roth IRA) were not different types of plans. For that reason, a Roth conversion was viewed as permissible under a SEPP if done correctly. Perhaps the IRS for purposes of this PLR considers any IRA account to be a different type of plan now.
That said, I would avoid partial transfers until the IRS either provides a lucid explanation or fails to set a pattern of harassing the thousands that have done these transfers. While not pretty, people that have reached their modification date are not out of the woods either if they did one of these transfers within the IRS audit limitation period. For others, I would avoid these partial transfers and possibly even full transfers until the dust clears somewhat. Most of these are not done for compelling reasons when compared to a possible bust.
2007-08-28 21:54, By: Alan S., IP: [24.116.165.60]

L2: IRS Reply On PLR 2007-20023While it would have been nice for The Service to reply “That”s OK” to each of Bill”s scenarios, I think that”s exactly what they are saying … given the normal, backwards, reverse logicalway of writing “governmentese.” Like Alan pointed out, transferring from an IRA to a K-plan, etc,is, without question, a bust. Let me point out the part from the IRS that I think makes things OK (see the red highlighted section below):
“For example, a trustee to trustee transfer of a portion of an IRA from which a series of substantially equal periodic payments has been launched and a subsequent failure to continue to include the account balance of the transferee IRA in the chosen methodology may cause a modification to such series that would result in the imposition of the 10 percent additional tax under Code section 72(t)(1).”
Assume annual recalculation in the following examples:
Take $400k of the $1mil IRA and transfer to a qualified plan … bust.
Take $400k of the $1mil IRA and transfer to a new IRA at a new custodian, but only use $600k(or whatever the adjusted balance is after the transfer)in the original IRA for the recalculations… bust.
Take $400k of the $1mil IRA and transfer to anew IRA at a new custodian and continue withdrawals based on the original $1mil IRA, whether it comes from one or bothIRA”s… OK.
The bottom line is that I think the IRS is saying Bill”s 4 scenarios are OK, and here”s the key, by not saying they are not OK.
Jim
2007-08-29 07:34, By: Jim, IP: [24.252.195.14]

L2: IRS Reply On PLR 2007-20023Guys,
I work for the government (not with the IRS) and if you think you are going to get a definitive answer you should be drug testedfor hallucinogenics. The government and the IRS make up the rules as they go along during the game.Guidelines are based on federal court legal decisions and even they can be contested up to the Supreme Court.
In other words we (the IRS) will interpret the rule how we see fit on each and every situation. If you don”t like our ruling take us to Federal Court and if we lose no problem i am being payed a government salary and the money we lose (via court decisions) does not come out of my paycheck.
Not passing judgement just the facts.
USAGolfHo
2007-08-30 06:48, By: UsaGolfHo, IP: [69.84.97.119]