72-T accounts
Does anyone know if I can do a partial-transfer for a client who has already begun taking 72 withdrawals from her brokerage account? I know the 72-T basics (we can’t make contributions to the account or change the withdrawal amount for 5 years or until age 59.5, whichever is longer). But if I transfer 90% to a qualified VA and continue to send her the exact same money each month (90% coming from the VA and 10% coming from the IRA) will this meet the 72-T requirements?
Thanks for your help with this!
Permalink Submitted by Alan Spross on Mon, 2008-06-16 23:55
While there have been thousands of partial transfers done over the years without problems, last year the IRS shook things up by releasing PLR 2007 20023, which busted a 72t plan for making a partial transfer to a fresh new IRA account, exactly as you propose.
Following is a link explaining some of the aspects of this PLR and how the IRS has yet to explain this contradiction with prior rulings. I think the risk is minimal, but you should still disclose the situation to the client and determine who will pay the retroactive penalty in the event the IRS pursues the client.
http://www.72t.net/Articles/ArticleShow.aspx?WA=260