IS THE 65 DAY RULE ALLOWED FOR A FINAL IRA DISTRIBUTION FROM A NON GRANTOR TRUST?
WOULD THERE BE ANY PROBLEM TAKING THE FINAL IRA DISTRIBUTION (IRA WILL NOW BE DEPLETED) WHICH WAS DISTRIBUTED TO A NON GRANTOR TRUST IN JANUARY AND DISTRIBUTING IT TO A BENEFICIARY IN FEBRUARY USING THE 65 DAY RULE? THE REASON FOR THIS WOULD BE FOR THE BENEFICIARY TO BE IN A MUCH LOWER TAX BRACKET IN 2015 SO HE CAN QUALIFY FOR A SIZABLE OBAMA CARE TAX CREDIT. THE ONLY DISADVANTAGES I CAN SEE, WHICH ARE OUTWEIGHED BY THE OBAMA CARE INSURANCE SAVINGS, ARE AN ADDITION 3% TAX ON THIS DISTRIBUTION IRA INCOME VIA JUMPING INTO THE 28% TAX BRACKET AND LESS OF AN ITEMIZED MEDICAL DEDUCTION IN 2014.
Permalink Submitted by Alan - IRA critic on Mon, 2015-02-02 17:45
I am no expert in fiduciary return rules, but my guess would be that you could not use the 65 day distribution exception to include the IRA distribution to the trust because that distribution was in 2015. If the IRA distribution was in the trust’s 2014 income then this rule could be applied. But there might be 2014 trust income for which a 2015 distribution to beneficiaries would go on beneficiary 2014 income tax returns. Again, just my best guess. NOTE: Trust must also be treated as a complex trust in 2014.
Permalink Submitted by mk foss on Mon, 2015-02-09 00:35
I’m not certain I follow the fact pattern here. If a final IRA distribution was received by the trust prior to 12/31/14, it can be distributed to trust beneficiaries within the first 65 days of 2015 and treated as a 2014 distribution for both the trust and the recipient. Any IRA distribution received in 2015 by a trust can be distributed during 2015 or also during the first 65 days of 2016 – in such a case the trust reports the distribution in 2015 and the recipient reports the income – which may be adjusted for other trust income and deductions.