Old IRA with Large After Tax Contribution
Hello. I have a client that is 84 years old and has always been self employed. He has $3,300,000 in his IRA and has been doing mandatory distributions of $200-250,000 a year for the past several years. We are trying to determine if he has any cost basis in them. He states that he put as much as $100,000 in after tax contributions into them when he was 60 years old as a catch up provision. He states it was never a profit share, Keogh, simple, sepp or 412i and that he has always only had an IRA. I can not track anything in the tax code that ever allowed you to invest more than $2,000 in an IRA. Are you aware of any old 1983 regulations that allowed you to add more than $2000 into an IRA? Thanks, David ❓
Permalink Submitted by Alan Spross on Sat, 2008-02-02 04:56
I am not aware of such an option.
While he obviously rolled over employer plan funds in the past in order to accumulate the substantial balance, no after tax funds were allowed to be rolled over to an IRA prior to 2002. All after tax rollovers or regular non deductible contributions must be documented on Form 8606 for the respective year of contribution to the IRA, or the IRS will have no acceptable way to recognize any tax basis in the IRA.
He may have accumulated after tax contributions in a pension plan back then, but they should not have found their way into an IRA. Perhaps his current or former tax preparer can shed some light on this.
Permalink Submitted by Al Fry on Sat, 2008-02-02 18:18
I don’t know what the limits were, but could it have been a SAR-SEP plan?