Publication 575 - Pension And Annuity Income - 2004 Page 16
ADVERTISEMENT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36tax-sheltered annuity (403(b) plan), or government plan is
service in the uniformed services for two years. The loan
not treated as a distribution from the plan. This exception
payments were suspended for that period. You must re-
applies only to a loan that either:
sume making loan payments at the end of that period and
the loan must be repaid by June 30, 2011 (5 years from the
•
Is used to buy your main home, or
date of the loan plus the period of suspension).
•
Must be repaid within 5 years.
Related employers and related plans. Treat separate
employers’ plans as plans of a single employer if they are
If a loan qualifies for this exception, you must treat it as a
treated that way under other qualified retirement plan rules
nonperiodic distribution only to the extent that the loan,
because the employers are related. You must treat all
when added to the outstanding balances of all your loans
plans of a single employer as one plan.
from all plans of your employer (and certain related em-
Employers are related if they are:
ployers) exceeds the lesser of:
•
•
Members of a controlled group of corporations,
$50,000, or
•
•
Businesses under common control, or
Half the present value (but not less than $10,000) of
•
your nonforfeitable accrued benefit under the plan,
Members of an affiliated service group.
determined without regard to any accumulated de-
ductible employee contributions.
An affiliated service group generally is two or more
service organizations whose relationship involves an own-
You must reduce the $50,000 amount if you already had
ership connection. Their relationship also includes the reg-
an outstanding loan from the plan during the 1-year period
ular or significant performance of services by one
ending the day before you took out the loan. The amount of
organization for or in association with another.
the reduction is your highest outstanding loan balance
Denial of interest deduction. If the loan from a quali-
during that period minus the outstanding balance on the
fied plan is not treated as a distribution because the excep-
date you took out the new loan. If this amount is zero or
tion applies, you cannot deduct any of the interest on the
less, ignore it.
loan during any period that:
Substantially level payments. To qualify for this ex-
ception, the loan must require substantially level payments
•
The loan is secured by amounts from elective defer-
at least quarterly over the life of the loan. This level pay-
rals under a qualified cash or deferred arrangement
ment requirement does not apply to the period in which you
(section 401(k) plan) or a salary reduction agree-
are on a leave of absence without pay or on a rate of pay
ment to purchase a tax-sheltered annuity, or
that is less than the required installment. Generally, this
•
You are a key employee as defined in section 416(i)
leave of absence must not be longer than one year. You
of the Internal Revenue Code.
must repay the loan within 5 years from the date of the loan
(unless the loan was used to buy your main home). Your
installment payments must not be less than your original
Reporting by plan. If your loan is treated as a distribution,
payments.
you should receive a Form 1099-R showing code “L” in box
However, if your plan suspends your loan payments for
7.
any part of the period during which you are in the uni-
formed services, you will not be treated as having received
Effect on investment in the contract. If your loan is
a distribution even if the suspension is for more than one
treated as a distribution, you must reduce your investment
year and the term of the loan is extended. The loan pay-
in the contract to the extent that the distribution is tax free
ments must resume upon completion of such period and
under the allocation rules for qualified plans explained
the loan must be repaid within 5 years from the date of the
earlier. Repayments of the loan increase your investment
loan (unless the loan was used to buy your main home)
in the contract to the extent that the distribution is taxable
plus the period of suspension.
under those rules.
If you receive a loan under a nonqualified plan other
Example 1. On July 1, 2004, you borrowed $40,000
from your retirement plan. The loan was to be repaid in
than a 403(b) plan, including a commercial annuity con-
level monthly installments over 5 years. The loan was not
tract that you purchase directly from the issuer, you in-
used to buy your main home. You make 9 monthly pay-
crease your investment in the contract to the extent that
ments and start an unpaid leave of absence that lasts for
the distribution is taxable under the general allocation rule
for nonqualified plans explained earlier. Repayments of
12 months. You were not in a uniformed service during this
period. You must repay this loan by June 30, 2009 (5 years
the loan do not affect your investment in the contract.
from the date of this loan). You can increase your monthly
However, if the distribution is excepted from the general
installments or you can make the original monthly install-
allocation rule (for example, because it is made under a
ments and on June 30, 2009, pay the balance.
contract entered into before August 14, 1982), you reduce
your investment in the contract to the extent that the
Example 2. The facts are the same as in Example 1,
distribution is tax free and increase it for loan repayments
except that you are on a leave of absence performing
to the extent that the distribution is taxable.
Page 16
ADVERTISEMENT
0 votes
Related Articles
Related forms
Form Nj-500-m - Return Of Gross Tax Withheld Form Salaries And Wages, Pension And Annuity Income And Gambling Winnings - 1996
Financial
Worksheet Iii And Iv- Qualified Capital Gain Exclusion And Partial Pension And Annuity Income Exemption
Financial
Form Nj-w4-p - Certificate Of Voluntary Withholding Of New Jersey Gross Income Tax From Pension And Annuity Payments - 1996
Financial
Form Nj-w-4p - Certificate Of Voluntary Withholding Of New Jersey Gross Income Tax From Pension And Annuity Payments
Financial
Form Nj-w-4p - Certificate Of Voluntary Withholding Of New Jersey Gross Income Tax From Pension And Annuity Payments
Financial
Related Categories
Parent category: Financial