There are a lot of unanswered questions when it comes to the tax rules for IRAs and other qualified plans. IRAs and qualified plans can shelter a significant amount of income from tax. Defined benefit plans are an example. A business owner can contribute and shelter up to $245,000 in these plans in 2022. This… Continue reading IRA Excess Contribution Tax for Stock Sale
Category: Retirement Accounts
Recent cases, rulings, and guidance for IRAs, self-directed IRAs, retirement accounts, and employee benefits.
Is Military Pension Taxable (Answered)
There are a number of tax breaks afforded to those in the military. This includes collection holds on unpaid taxes owed by members of the military to laws that exempt certain income from tax altogether. The exemption from paying tax on military pay for injuries is an example. The recent Valentine v. Commissioner, T.C. Memo.… Continue reading Is Military Pension Taxable (Answered)
Can a Self-Directed IRA Hold Gold Coins?
Precious metals IRAs are popular. This includes silver IRAs, gold Roth IRAs, and even gold-backed IRAs. These accounts allow investors to invest in these alternative assets. This in turn allows the investors to diversify their exposure to stocks and bonds. For those with special interests and knowledge to make these investments, they can also allow… Continue reading Can a Self-Directed IRA Hold Gold Coins?
Fixing Self-Directed IRA Errors
There are ways to structure transactions to avoid income taxes. Creative taxpayers and tax attorneys have used qualified retirement accounts for this purpose (the tax savings from ESOPs is an example). One has to be careful when structuring transactions involving these qualified plans. Given the flexibility in the rules and the absence of financial advisors,… Continue reading Fixing Self-Directed IRA Errors
Avoiding the 60-Day IRA Rollover Requirement
If a taxpayer takes money out of their retirement account, they generally have to pay income tax on the amount distributed. What if the taxpayer wants to put the money back into the account? There have been several examples where Congress has allowed taxpayers to put money back into their accounts. The recent CARES Act… Continue reading Avoiding the 60-Day IRA Rollover Requirement
Big Tax Savings With ESOP, But Requires Work
An employee stock ownership plan (ESOP) can produce significant income tax savings. This tax savings isn’t exactly free. One has to keep up with the ESOP and the relevant rules to ensure that the tax savings are achieved. This compliance work is required and failure to comply can be costly. The recent Ed Thielking v.… Continue reading Big Tax Savings With ESOP, But Requires Work
Early IRA Distribution, Gambling Not a Disability
Early distributions from IRAs are subject to a 10 percent additional tax. The 10 percent additional tax does not apply if the distribution is taken when the IRA owner is disabled. The recent Gillette v. Commissioner, T.C. Memo. 2018-195, case addresses whether medically-induced compulsive gambling qualifies as a disability. The Facts & Procedural History The taxpayer-wife is a… Continue reading Early IRA Distribution, Gambling Not a Disability
Establishing Tax Basis in IRA Contributions
Contributions to IRAs are deductible. If not deductible, the taxpayer has basis in his IRA so that this amount is not taxable when taken out of the IRA. The idea is that the taxpayer probably paid income taxes on the money prior to putting it into the IRA and should not be taxed on it… Continue reading Establishing Tax Basis in IRA Contributions
Tax Court Says Royalties Paid to Roth IRA Were Excess Contributions to IRA
The U.S. Tax Court recently issued another opinion involving a LLC owned by a self-directed IRA. The case is Block Developers, LLC v. Commissioner, T.C. Memo. 2017-142. The case invovles an IRA LLC that purchased a patent and then licensed the patent back to the prior owner, with the intent of the IRA LLC collecting… Continue reading Tax Court Says Royalties Paid to Roth IRA Were Excess Contributions to IRA
Appeals Court Upholds IC-DISC Roth IRA Tax Strategy
The Sixth Circuit Court of Appeals upheld the IC-DISC Roth IRA tax strategy in In Summa Holdings, Inc. v. Commissioner, No. 16-1712 (2017). This tax strategy allows business owners to sidestep the annual Roth IRA contribution limits, thereby allowing the taxpayers to amass sizable amounts in their Roth IRAs to grow tax-free. The case is… Continue reading Appeals Court Upholds IC-DISC Roth IRA Tax Strategy