IRA transfer that has been set up with 72t equal income pymt
I have a potential client who is under the age of 59 1/2 who is taking monthly income from two IRA sources that have both been set up under 72t for substantial equal periodic payments. One IRA is with a variable annuity and the second IRA is in American Funds and both investments are set up for SEPP. My question would be simply this: can I do a custodial IRA transfer from her two existing IRA investments into two new IRA’s and set up the identical monthly income as she currently is getting and everything be “kosher” with the IRS? Thanks for your input. Bill
Permalink Submitted by Alan Spross on Fri, 2008-02-08 00:33
This would likely be OK. The only concern was caused by PLR 2007 20023 which was ruled as a 72t modification when the taxpayer did a partial transfer of an IRA to a new account. In that case, the IRS has still be unable to present a lucid explanation of their reasoning, and there is no evidence that the IRS has inquired into many of the other thousands of transfers that have been done with active 72t plans.
Your situation is not a partial transfer of an account, but a total transfer of each IRA account to a new account. 2007 20023 just makes me hedge my opinion somehwat until the IRS explains their unprecedented ruling in more detail.
While the client probably already must file a 5329 to claim the exemption, it is almost certain that he will after the transfer is made.