Transfer into IRA Account with 72t

L1: Transfer into IRA Account with 72tClient has an IRA. Part of it is in a brokerage account and part in a fixed annuity – same “parent” company, different Trustees. We use the fixed annuity(higher interest ratethan brokerage money market) for a portion of the annual 72t distribution by transferring a portion from the annuity into the brokerage account. Never hada problem until this year when the 1099’s were coded 1 vs. 2 from the receiving firm. We were not aware of the rules surrounding modifications rules stating no transfers can go into an account on 72t. We used both values when determining the amount to take for 72t. We just looked at it as being the same IRA just with 2 different account numbers. Actually, not only have we transferred funds from the annuity to brokerage to cash flow, we’ve actually stopped cash flow from brokerage and started on annuity instead. Again – looking at it as “one pot”. I guess IRA’s can not be combined and occassionally commingled to take 72t?? I realize client can file 5329. Will this satisfy the IRS? Can we continue to do business as we have been and just rely each year on a 5329? As always – thanks for your expertise.2005-01-25 15:52, By: Kim, IP: [12.31.97.34]
L2: Transfer into IRA Account with 72tHello Kim:
I think I understand the fact set but just to make sure: You defined a SEPP plan that contained two IRA accounts, one of which happened to contain an annuity as one of its investments. As the annuity (it doesn’t matter what kind) paid off; $$$ were deposited in that IRA; then periodically $$$ were transferred from the IRA contianing the annuity to the other IRA & SEPP distributions were made from the other IRA.
If this true you are fine. I suggest you go to Articles of Interest and read the 3rd article down entitled “Changes to Account Balances”.
Conversely, if you originally defined the SEPP plan as only containing IRA #1 and excluded IRA #2 which contained the annuity; then you have had a busted SEPP plan from day one.
TheBadger
wjstecker@wispertel.net
2005-01-25 16:11, By: TheBadger, IP: [66.250.23.21]

L2: Transfer into IRA Account with 72tThanks Badger. As always, that answers my question – however, since our Trustee coded the 1099 with a 1 vs. 2 – I assume we should advise our client (after talking to their CPA of course) to file a 5329? Correct?2005-01-26 08:02, By: Kim, IP: [12.31.97.34]

L2: Transfer into IRA Account with 72tHello Kim:
Yes, either file 5329 with the tax return or you may chose to fight what I suspect will be an uphill battle in an attempt to get the trustee to issue a corrected 1099R.
TheBadger
wjstecker@wispertel.net
2005-01-26 08:06, By: TheBadger, IP: [66.250.23.21]

L2: Transfer into IRA Account with 72tThat would be correct – a little warning never hurts. 2005-01-26 08:09, By: Gfw, IP: [172.16.7.101]