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WAHUQ in IRA account? New 2015 IRS Rules Zitat sleepless:
There is a new IRS rule going into effect for the 2015 tax year that could impact people who originally owned WAHUQ (PIERS) shares in an IRA account. The bookkeeping for those shares was taken over at emergence by WMILT, and so the position disappeared from brokerage accounts (or at least it should have). If the PIERS were originally in a brokerage IRA account (traditional or Roth), then in essence the WMILT has become the custodian (or trustee) for what is essentially an IRA account which now holds PIERS LTIs.
This new rule would be relevant for anyone who received an 8/1/2014 cash distribution check from WMILT on account of PIERS which were originally held in an IRA account if this distribution check was made payable to the account owner (i.e. payable to "YourName") and not to your IRA broker (i.e. payable to "BrokerName FBO YourName IRA").
Putting it differently: if you received such check and were able to cash it or deposit it into your personal checking account, and if the check were on account of WAHUQ (PIERS) shares originally in an IRA account, then you should be concerned about the new IRS rule going into effect 1/1/2015.
There are two main ways to move cash from one IRA to another IRA of the same type (tIRA>tIRA, or rIRA>rIRA), neither of which results in tax liability if done correctly:
(1) "direct transfer" (aka "trustee-to-trustee transfer"), in which the account owner (you) never takes possession of the cash;
(2) "60-day rollover", in which the account owner (you) takes temporary possession of the cash, but then gets the same amount of cash deposited into another IRA account of the same type within 60 days.
(In common use, both (1) and (2) are often called "rollovers", but in IRS-speak only the latter is a "rollover")
For that 8/1/2014 cash distribution from WMILT on account of PIERS originally in an IRA account, people who received a check payable to "YourName" and didn't want any tax liability should have done a 60-day rollover (that's what I had to do): deposit the check in my personal checking account, wait for it to clear, then write a personal check to my IRA broker for deposit into the IRA account in which the WAHUQ shares originally resided (and make sure the broker coded the deposit as a "60-day rollover" and not a tax year contribution or something else).
Here's the potential problem due to the new IRS rule about 60-day rollovers: starting 1/1/2015, the new IRS rule says that, regardless of how many IRA accounts a person has, only one 60-day rollover is allowed per tax year per person (this is a change from 2014 and before). If you do two 60-day rollovers in 2015, the second one will not be free of tax liabilities.
Possible problems due to the new rollover rule in the IRS' own words:
"Tax consequences of the one-rollover-per-year limit
Beginning in 2015, if you receive a distribution from an IRA of previously untaxed amounts:
-- you must include the amounts in gross income if you made an IRA-to-IRA rollover in the preceding 12 months (unless the transition rule above applies), and
-- you may be subject to the 10% early withdrawal tax on the amounts you include in gross income.
Additionally, if you pay the distributed amounts into another (or the same) IRA, the amounts may be:
-- treated as an excess contribution, and
-- taxed at 6% per year as long as they remain in the IRA."
You can read more about this in the attached PDF "Application of One-Per-Year Limit on IRA Rollovers Announcement 2014-32"
So how could this new-for-2015 rollover limitation rule affect someone with PIERS LTIs which arose from WAHUQ shares originally held in an IRA account? If there are two (or more) cash distributions from WMILT in 2015 and the checks are payable to "YourName", so that you have to do a 60-day rollover to get the cash into the brokerage IRA account, then you have violated the new "one-rollover-per-year" rule and will be subject to the penalties described above.
What can be done about this? The obvious answer is to change things so that 2015 cash distributions are made as "direct transfers" rather than "60-day rollovers", because, as the IRS points out, there are no restrictions on the number of "direct transfers" a person can do in a single tax year.
So... I contacted WMILT about this issue and asked why the PIERS cash distributions are made by check, whereas the RONs were distributed directly to the broker (via DTC). Why can't the cash distributions be sent right to brokers via DTC as well? The answer didn't really explain the why, just that it cannot be done.
So now what? The key for me was reading the last sentence in the IRS Announcement attached here as a PDF: "IRA trustees can accomplish a trustee-to-trustee transfer by transferring amounts directly from one IRA to another orby providing the IRA owner with a check made payable to the receiving IRA trustee."
That red text basically says that if the IRA account owner cannot take possession of the cash, because the check is not made out to the account owner, then the check, once deposited into the "receiving" IRA account, will represent a "direct transfer" (aka "trustee-to-trustee transfer") and not a "60-day rollover". And because there is no limit on the number of "direct transfers" per year one is allowed, there is no problem.
So... I checked with my broker to find out how the check would need to be made out so that the broker could accept the check directly (forwarded on by me) for deposit into my IRA, and I was told that the check would need to be made payable to "BrokerName FBO MyName Roth IRA". Please note that your broker might require a different format!
So then... I contacted WMILT again and asked how I could update my PIERS LTI account related to IRA so that the next checks would be made payable to "BrokerName FBO MyName Roth IRA" and thus able to be accepted directly by my IRA broker. I was told all I had to do was email WMILT with my current PIERS LTI account details (name, address, WMILT account numbers), and with the new name I wanted on the account (i.e. "BrokerName FBO MyName Roth IRA"). I did that and within one hour I received confirmation from WMILT that the change had been made.
So now... I feel confident that even if there are two cash distributions in 2015 on account of my IRA-related PIERS LTIs, I won't run afoul of the new IRS rollover rules. When there is a cash distribution from WMILT, the check should still be sent to my home, but it should be made payable to "BrokerName FBO MyName Roth IRA" so that I can just pop it into a new envelope and send it off to my broker for deposit into my IRA account there, thus completing a trustee-to-trustee transfer. If I get another distribution check in 2015, I will do the same thing again and know that I'm not in violation of the new IRS rollover rules.
If you have an IRA account in this situation, you should contact both your IRA custodian and the WMILT before taking any action.
And finally... for those thinking "who cares, I didn't own any PIERS", what about when equity LTIs come into all that money that AzBop are promising? If your old equity shares were held in an IRA account, you will be facing the same issue, so you might want to bookmark this post for future reference. ++++++++++++++++++++++++++++++++++++++++++++++++++ www.boardpost.net/forum/...=dlattach;topic=6628.0;attach=1448
Zitat:
Announcement 2014-32
This announcement is a follow-up to Announcement 2014-15, 2014-16 I.R.B. 973, addressing the application to Individual Retirement Accounts and Individual Retirement Annuities (collectively, “IRAs”) of the one-rollover-per-year limitation of § 408(d)(3)(B) of the Internal Revenue Code.
Section 408(d)(3)(A)(i) provides generally that any amount distributed from an IRA will not be included in the gross income of the distributee to the extent the amount is paid into an IRA for the benefit of the distributee no later than 60 days after the distributee receives the distribution (often referred to as a “60-day rollover”). Section 408(d)(3)(B) provides that an individual is permitted to make only one nontaxable 60- day rollover between IRAs in any 1-year period. As discussed in Announcement 2014- 15, Proposed Regulation § 1.408-4(b)(4)(ii) and IRS Publication 590, Individual Retirement Arrangements (IRAs), provided that the one-rollover-per-year limitation was applied on an IRA-by-IRA basis. However, the Tax Court in Bobrow v. Commissioner, T.C. Memo. 2014-21, held that the limitation applies on an aggregate basis, meaning that an individual could not make more than one nontaxable 60-day rollover within each 1-year period even if the rollovers involved different IRAs. In Announcement 2014-15, the IRS indicated that it anticipated following the interpretation of § 408(d)(3)(B) in Bobrow, and accordingly that it would withdraw the proposed regulation and revise Publication 590 to the extent needed to follow that interpretation, but that it would not apply the Bobrow interpretation of § 408(d)(3)(B) before 2015. Consistent with Announcement 2014-15, Proposed Regulation § 1.408-4(b)(4)(ii) was withdrawn on July 11, 2014 (79 FR 40031), and subsequent relevant IRS publications (including new Publication 590-A, “Contributions to Individual Retirement Arrangements (IRAs)”) will reflect the Bobrow interpretation of § 408(d)(3)(B).
This announcement is intended to address certain concerns that have arisen since the release of Announcement 2014-15. The IRS will apply the Bobrow interpretation of § 408(d)(3)(B)for distributions that occur on or after January 1, 2015. This means that an individual receiving an IRA distribution on or after January 1, 2015, cannot roll over any portion of the distribution into an IRA if the individual has received a distribution from any IRA in the preceding 1-year period that was rolled over into an IRA. However, as a transition rule for distributions in 2015, a distribution occurring in 2014 that was rolled over is disregarded for purposes of determining whether a 2015 distribution can be rolled over under § 408(d)(3)(A)(i), provided that the 2015 distribution is from a different IRA that neither made nor received the 2014 distribution. In other words, the Bobrow aggregation rule, which takes into account all distributions and rollovers among an individual’s IRAs, will apply to distributions from different IRAs only if each of the distributions occurs after 2014.
2 A rollover from a traditional IRA to a Roth IRA (a “conversion”) is not subject to the one-rollover-per-year limitation, and such a rollover is disregarded in applying the one-rollover-per-year limitation to other rollovers. However, a rollover between an individual’s Roth IRAs would preclude a separate rollover within the 1-year period between the individual’s traditional IRAs, and vice versa. (For purposes of this announcement, the term “traditional IRA” includes a simplified employee pension described in § 408(k) and a SIMPLE IRA described in § 408(p).)
The one-rollover-per-year limitation also does not apply to a rollover to or from a qualified plan (and such a rollover is disregarded in applying the one-rollover-per-year limitation to other rollovers), nor does it apply to trustee-to-trustee transfers. See Rev. Rul. 78-406, 1978-2 C.B. 157. IRA trustees are encouraged to offer IRA owners requesting a distribution for rollover the option of a trustee-to-trustee transfer from one IRA to another IRA. IRA trustees can accomplish a trustee-to-trustee transfer by transferring amounts directly from one IRA to another or by providing the IRA owner with a check made payable to the receiving IRA trustee.
DRAFTING INFORMATION
The principal author of this announcement is Roger Kuehnle of the Employee Plans, Tax Exempt and Government Entities Division. Questions regarding this announcement may be sent via e-mail to RetirementPlanQuestions@irs.gov.
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