Making the Change??

L1: Making the Change??Your 72T site is great, but I cannot contact you through it as your “Contact us” just shows up as “Page unavailable”.

I need an opinion on my 72T calculation an I am wondering if you are in business to give me a written opinion, and how much you would charge. This is the problem:

I have two years left on my 72T distribution (The five years will be up an I will be over 60). I originally set it up on the annuitization plan and now I want to switch to the lower distribution plan. Morgan Stanley and A.G. Edwards have informally told me (they do not give tax advice and advised me to see a CPA) if I switch that the requirement for the new withdrawal will end when my original 72T calculation runs out, i.e., I turn 59 1/2 or the five years are up. This makes complete sense to me. HOWEVER, my local CPA (A small town CPA) tells me if I switch to the new formula I will have to remain on that formula for the rest of my life, or be subject to the penalties. This does not make sense as what happens when you turn 70 1/2 and have maximum withdrawals. To me, this would mean two contrasting IRS laws.

Before I make the decision I need someone to go out on a limb and actually send me something written to let me know that if I change, it will only be until the initial 72T calculation period is up. If, on the other hand, my CPA is right, I also need to know that. I am assuming that the main offices of Morgan Stanley and A.G. Edwards are a little more cognizant of the regulations than my local CPA.

Any help or advice you can give would be appreciated2002-11-10 08:07, By: Bill, IP: [127.0.0.1]

L2: Making the Change??We don”t give written opinions on particular topics. However, I will give you an opinion about your CPA – he apparently gave you an answer without doing any research. Consider the following, none of which has recently changed:
1) The 10% penalty tax automatically goes away at age 59.5
2) The maximum duration of a SEPP plan is the later of 5 years orage 59.5
3) When a SEPP plan ends, there is no recapture of previous penalty taxes that would otherwise have been due.
4)Between ages 59.5 and 70.5 an IRA owner can take as much or as little as desired.
5) At age 70.5 the minimum distribution rules are just that – a minimum distribution – you can always take more.
6) For SEPP plans thepayment generated by the MD method is the exact amount – you can”t take out any more or any less.
7)Revenue Ruling 2002-62 givesan existing SEPPplan to make a one-time change to the minimum distribution method.

2.03(b) One-time change to required minimum distribution method. An individual who begins distributions in a year using either the fixed amortization method or the fixed annuitization method may in any subsequent year switch to the required minimum distribution method to determine the payment for the year of the switch and all subsequent years and the change in method will not be treated as a modification within the meaning of 72(t)(4). Once a change is made under this paragraph, the required minimum distribution method must be followed in all subsequent years. Any subsequent change will be a modification for purposes of 72(t)(4).

Section 72(t)(4) provides that if the series of substantially equal periodic payments that is otherwise excepted from the 10-percent tax is subsequently modified (other than by reason of death or disability) within a 5-year period beginning on the date of the first payment, or, if later, age 59 1/2, the exception to the 10-percent tax does not apply, and the taxpayer”s tax for the year of modification shall be increased by an amount which, but for the exception, would have been imposed, plus interest for the deferral period.
Nothing inRevenue Ruling 2002-62 makes the MD change irrevocable after the SEPP plan ends. Section 72(t)(4) deals only with the 10% penalty tax prior to age 59.5

Please feel free to copy this response and send it to your CPA.2002-11-10 08:08, By: Gfw, IP: [127.0.0.1]

L2: Making the Change??Hello Bill:

Well, I will go out on a limb. All the advise you have received to-date from your broker & your local CPA is wrong. Gordon”s reply above is correct. Drop me a note with your particulars & I think I can straighten this mess out & provide a written opinion to that effect.
TheBadger
wjstecker@wispertel.net
2002-11-10 08:59, By: TheBadger, IP: [127.0.0.1]