recalculating

L1: recalculatingI have a client who started a 72T distribution in 1997 at age 41. She used the amortization method with a high assumed interest rate. Subsequently her new biz has taken off and she wants to reduce her distributions. Plus, with the stock mkt returns of the last 3 years the account value has taken a beating and the higher original interest rate assumption makes it very difficult to not invade principal aat this time.
To complicate the situation, she rolled another IRA into this account earlier in the year. To keep things as close to as they were when she started the 72t, shouldn”t we used the account balance prior to the new amount being added to the account, even though that was in May?
This obviously would give her a smaller monthly distribution based on the MD method (which she wants), but I’d hate to have the whole thing blow up by doing something wrong in the transition here.
THanks for any help you can give. PB2003-10-09 18:43, By: PB, IP: [127.0.0.1]

L2: recalculatingI am fearful you have a significant problem — that of rolling the other IRA into the SEPP IRA. Revenue Ruling 2002-62 specifically says “a modification to the series of payments will occur if, …any addition to the account balance other than gains or losses…” In short, I think your client has committed a “modification”; thus invoking IRC 72(t)(4); e.g. the 10% penalty.
Now, how to fix it??? Asa first solution, somehow get the trustee/custodian to treat the “roll-in” as an error, and reverse it moving the money back out into a separate IRA. Two, seek a PLR seeking some other more creative solutions. Three, give up & pay the penalties.

TheBadger
wjstecker@wispertel.net
2003-10-10 13:10, By: TheBadger, IP: [127.0.0.1]