L1: Mid-Term RateI recently heard that a financial institution was allowing individuals to use the current month”s mid-term rate to calculate substantially equal periodic payments starting in that same month. For example, if an individual wanted to start their distributions in August, they would allow them to use August”s mid-term rate in the calculation. Their reasoning is that mid-term rates are determined using the previous month”s information. So August”s rate is calculated using July data. Theyare basing their interpretation off of Revenue Ruling 2002-62 and see the “two months immediately preceding the month in which the distribution begins” as the data from those months not the rate published in that month.
Based on my research I do not believe this is correct. Revenue Ruling 2002-62 makes it pretty clear to me, but is there anything else (IRS Notice, Bulletin, etc.) that I can use to show this financial institution is incorrect? 2008-07-28 12:12, By: JEK, IP: [184.108.40.206]
L2: Mid-Term RateI also agree that Rev.Rul. 2002-762 is very clear. It talks about the rateand not what calculations were included in the rate. I haven”t seen any additionalclarification.
If I was a client of the Bank, I would get a statement from a senior officer of the bank that if what they are promoting is challenged by the IRSthat they would be responsible for the payment of all legal fees, penalties and taxes associatedadopting what they are promoting.
Actually, I think I would just find a different bank.2008-07-28 12:32, By: Gfw, IP: [220.127.116.11]
L2: Mid-Term RateHello JEK:
I too concur with Gordon. Further, to complicate matters, the August 2008 Mt/Afr is developed from a smoothed data curve from actual market yield data for the dates 6/16/08 through 7/15/08; e.g. mid-month to mid-month. Then, the Treasury operations department goes to work for approximately a weekand then sends the AFRs over to the IRS for publication in a Revenue Procedure as well as in the next week”s Cummulative Bulletin.
Long story short, Treasury could have decided touse any daily database of information it so chose to use to determine AFRs and the IRS would simply accept it as gospel. Then, the IRS puts a label on it pursuant to IRC 7520; the operable code section on AFRs. Further, lets remember that dozens (at least) code sections rely upon 7520 to get AFRs for computational purposes; IRC 72(t) and revenue Ruling 2002-62 is only one.
[email protected] 18:32, By: TheBadger, IP: [18.104.22.168]