reasonable interest rate

L1: reasonable interest ratethis is getting confusing. after talking to the irs today they are unwilling to define a reasonable interest rate.the latest article “a whole new set of rules” says the irs defines a reasonble interest rate is 120% of the midterm rate. i can tell you over the last 100 years the stock market has returned @7%/year. so 7% would seem reasonable to me. i would appreciate hearing other opinions.2002-10-08 16:19, By: jjames, IP: [127.0.0.1]
L2: reasonable interest rateActually, the MAXIMUM reasonable interest rate for purposes of calculating a SEPP distribution is 120% of the Mid-Term rate – anything less is also reasonable. That’s right out of Revenue Ruling 2002-62. From the new RR….SECTION 2.02(c) Interest rates. The interest rate that may be used is any interest rate that is not more than 120 percent of the federal mid-term rate (determined in accordance with 1274(d) for either of the two months immediately preceding the month in which the distribution begins). 2002-10-08 16:30, By: Gfw, IP: [127.0.0.1]

L2: reasonable interest ratethanx, i guess its in black and white and no way around it. although, i think both the life expectancy and resonable interest rate the irs requires us to use are highly questionable.2002-10-08 17:13, By: jjames, IP: [127.0.0.1]

L2: reasonable interest rateCan’t argue with you on the interest rate. On the other had, the mortality table is very close to the typical annuity mortality table used by many insurance companies.And, (I hope) we are living longer :~}2002-10-08 17:18, By: Gfw, IP: [127.0.0.1]

L2: reasonable interest rateJust so we are all clear, RR 2002-62 does not become mandatory until 1/1/03; therefore, SEPP plans enacted before that date can use a different standard for determining what constitutes a reasonble interest rate; e.g. I could easily sign on to 120% of the lon-term rate & in certain factual circumstances, rates that are even higher.

TheBadger
wjstecker@wispertel.net
2002-10-08 18:00, By: TheBadger, IP: [127.0.0.1]

L2: reasonable interest rateso if i were to use 6% as the reasonable rate of return, would i have to provide documentation to the irs showing the formula used for my calculation that would immediately trigger an audit? i think studies of historical rates of returns fo stocks,bonds,cd would support 6%, and i believe i could prove this to the irs. FYI, i’m really not planning on taking payments for another 6 years. hopefully interest rates will be higher and laws improved.2002-10-08 19:00, By: jjames, IP: [127.0.0.1]

L2: reasonable interest ratePlain and Simple… use 6% (after 12/31/2002) and your plan doesn’t comply with Rev. Rul. 2002-62 – non-compliance means 10% penalty. Reasonable isn’t in the definition (it was in IRS Notice 89-25) – they merely stated the maximum rate. Start this year, or be content (at least for now), with 120% of the mid-term rate. 2002-10-08 19:16, By: Gfw, IP: [127.0.0.1]