Conversion to Roth creates a contract with the IRS
In 2010, I converted a private 401K account to a ROTH account. The primary reason for the conversion was the availability of the stretch option. I am convinced that a contract was formed between me and the IRS. For the right to own a ROTH governed by the 2010 IRS rules, I paid ordinary income taxes on the amount converted.
If the IRS now tries to take away the stretch option, I should be entitled to damages caused by lost value to my non-spousal beneficiaries. I have searched the IRS website for how to submit a claim for damages but am unable to find how to submit such a claim.
Any help or advice would be appreciated.
Further info on contracts that I found with a Google searches:
The 5 Elements That Constitute a Binding Contract
Offer.
Acceptance.
Consideration.
Mutuality of Obligation.
Competency and Capacity.
The “Offer” in 2010 was the IRS allowing us to convert our 401k plans to a Roth plan with the distributions as defined in IRS publications current in 2010.
The “Acceptance” was me providing the IRS with the paperwork documenting the conversion.
The “Consideration” was our paying the IRS ordinary income tax on the converted amounts and the IRS allowing our Roths per 2010 IRS rules.
The “Mutuality of Obligation” was I was obligated to pay the income tax and the government was obligated to allow our Roth with 2010 rules.
The “Competency and Capacity” was my being rational and having the money to pay the taxes. Presumably the US government possessed “Competency and Capacity”.
https://www.cohenseglias.com/contracting-database/unilateral-change/
As a general rule, the Changes clause gives the government the unilateral right to order changes in certain listed contract provisions during the course of performance, in exchange for adjusting the contract price or delivery schedule.
Permalink Submitted by Alan - IRA critic on Tue, 2021-05-11 22:37
Obviously, any of the changes made to the tax code by Congress generate winners and losers. The IRS does not make the rules, they just administer the provisions Congress passes into law. What ultimately led up to Congress accelerating tax income from inherited IRAs was a Supreme Court decision that inherited IRAs should not be treated as retirement funds for beneficiaries, only for owners. Inherited IRAs also lost creditor protection in most states. The type of lawsuit you are proposing against Congress has absolutely no chance of success, even if it were to go all the way to the Supreme Court. Therefore, effort would be better spent elsewhere. For example, if you left an IRA to a CRT for your beneficiaries, in some cases the stretch would be replicated. Perhaps other remedies will be developed over time. After all there are several million people with various types of retirement accounts that have all been negatively effected in the same manner. This has upset the estate plans of thousands of high net worth individuals who have named a trust as their beneficiary for several reasons, and they have all lost the stretch except for certain eligible beneficiaries.