What valuation to use?
L1: What valuation to use?
I am about to start my SEPP. I have a question about what valuation date of my account to use.
Most, if not all literature I have read says I can use the valuation at 12/31 of the previous year (2010), which is a valuation I would prefer.
My question is, since I have taken medically qualified distributions (which I will file seperate 5329), do I have to use a valuation date after the last medical distribution? Or can I use the 12/31/10 valuation?
2011-10-25 21:29, By: dpantle, IP: [220.127.116.11]
L2: What valuation to use?
Use the balance anytime after you made the other distributions. The balance used must be a reasonable representation of the account value used to determine the annual distribution.
Since the funds were removed and already used, it wouldn’t be reasonable to include those previous distributions in the SEPP calculations.
2011-10-25 21:58, By: Gfw, IP: [18.104.22.168]
L3: What valuation to use?
I had to re-read gfw’s response so let me clarify. I would have said it as ” Since you took distributions since 12/31/2010, you have to use a balance after the last distributions because you can not use them as the basis for your SEPP 72-T plan after having
reduced it by taking distributions from it.
2011-10-26 00:22, By: dlzallestaxes, IP: [22.214.171.124]
L4: What valuation to use?
Just FYI – you cannot use more than one exception for the same distributed dollars. So if you start your plan in November, regardless of what date you determined your account balance on, any medical expensespaid forafter 10/31
cannot be applied to the medical exception you are using for distributions prior to November. For example, if your AGI is 100,000 and your medical costs are17,500 for the year, you can apply 10,000 (17,500 less 7.5% of AGI or 7,500= 10,000) to medical.
But you must complete paying for the medical costs in the month prior to starting your plan. You cannot take SEPP distributions in November and apply any of those distributions to medical costs because starting in November your entire distribution is considered
a SEPP distribution (5329 exception code 02; payments made prior to November may qualify for 5329 exception code 05).
You can either use separate 5329 forms for each code or do as the IRS Inst indicate, which is multiple use Code 12 with the breakdown on a separate explanatory statement.
2011-10-26 02:16, By: Alan S., IP: [126.96.36.199]
L5: What valuation to use?
Thanks for the help. It has reinforced what I thought, and prevented me from making a costly mistake.
2011-10-27 01:38, By: dpantle, IP: [188.8.131.52]