Publication 575 - Pension And Annuity Income - 2004 Page 26
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
36If you are under age 59
/
when a distribution is paid to
Retirement bonds. If you redeem retirement bonds pur-
1
2
you, you may have to pay a 10% tax (in addition to the
chased under a qualified bond purchase plan, you can roll
regular income tax) on the taxable part (including any tax
over the proceeds that exceed your basis tax free into an
withheld) that you do not roll over. See Tax on Early
IRA or qualified employer plan. Subsequent distributions of
Distributions, later.
those proceeds, however, do not qualify for the 10-year tax
option or capital gain treatment.
Partial rollovers. If you receive a lump-sum distribu-
tion, it may qualify for special tax treatment. See
Annuity contracts. If an annuity contract was distributed
Lump-Sum Distributions, earlier. However, if you roll over
to you by a qualified retirement plan, you can roll over an
any part of the distribution, the part you keep does not
amount paid under the contract that is otherwise an eligible
qualify for special tax treatment.
rollover distribution. For example, you can roll over a single
sum payment you receive upon surrender of the contract to
Rolling over more than amount received. If the
!
the extent it is taxable and is not a required minimum
part of the distribution you want to roll over ex-
distribution.
ceeds (due to the tax withholding) the amount you
CAUTION
actually received, you will have to get funds from some
Rollovers of property. To roll over an eligible rollover
other source (such as your savings or borrowed amounts)
distribution of property, you must either roll over the actual
to add to the amount you actually received.
property distributed or sell it and roll over the proceeds.
You cannot keep the distributed property and roll over cash
Example. You receive an eligible rollover distribution of
or other property.
$10,000 from your employer’s qualified employee plan.
If you sell the distributed property and roll over all the
The payer withholds $2,000, so you actually receive
proceeds, no gain or loss is recognized on the sale. The
$8,000. If you want to roll over the entire $10,000 to
sale proceeds (including any portion representing an in-
postpone including that amount in your income, you will
crease in value) are treated as part of the distribution and
have to get $2,000 from some other source to add to the
are not included in your gross income.
$8,000 you actually received.
If you roll over only part of the proceeds, you are taxed
If you roll over only $8,000, you must include the $2,000
on the part you keep. You must allocate the proceeds you
not rolled over in your income for the distribution year.
keep between the part representing ordinary income from
Also, you may be subject to the 10% additional tax on the
the distribution (its value upon distribution) and the part
$2,000 if it was distributed to you before you reached age
representing gain or loss from the sale (its change in value
59
1
/
.
2
from its distribution to its sale).
Time for making rollover. You generally must complete
Example 1. On September 1, 2004, Paul received an
the rollover of an eligible rollover distribution paid to you by
eligible rollover distribution from his employer’s noncon-
the 60th day following the day on which you receive the
tributory qualified employee plan of $50,000 in nonem-
distribution from your employer’s plan.
ployer stock. On September 24, 2004, he sold the stock for
The IRS may waive the 60-day requirement where the
$60,000. On October 1, 2004, he contributed $60,000
failure to do so would be against equity or good con-
cash to a traditional IRA. Paul does not include either the
science, such as in the event of a casualty, disaster, or
$50,000 eligible rollover distribution or the $10,000 gain
other event beyond your reasonable control.
from the sale of the stock in his income. The entire $60,000
rolled over will be ordinary income when he withdraws it
Example. In the previous example, you received the
from his IRA.
distribution on June 30, 2005. To postpone including it in
your income, you must complete the rollover by August 29,
Example 2. The facts are the same as in Example 1,
2005, the 60th day following June 30.
except that Paul sold the stock for $40,000 and contributed
Frozen deposits. If an amount distributed to you be-
$40,000 to the IRA. Paul does not include the $50,000
comes a frozen deposit in a financial institution during the
eligible rollover distribution in his income and does not
60-day period after you receive it, the rollover period is
deduct the $10,000 loss from the sale of the stock. The
extended. An amount is a frozen deposit if you cannot
$40,000 rolled over will be ordinary income when he with-
withdraw it because of either:
draws it from his IRA.
•
The bankruptcy or insolvency of the financial institu-
Example 3. The facts are the same as in Example 1,
tion, or
except that Paul rolled over only $45,000 of the $60,000
•
A restriction on withdrawals by the state in which the
proceeds from the sale of the stock. The $15,000 proceeds
institution is located because of the bankruptcy or
he did not roll over includes part of the gain from the stock
sale. Paul reports $2,500 ($10,000/$60,000 × $15,000) as
insolvency (or threat of it) of one or more financial
capital gain and $12,500 ($50,000/$60,000 × $15,000) as
institutions in the state.
ordinary income.
The 60-day rollover period is extended by the period for
which the amount is a frozen deposit and does not end
Example 4. The facts are the same as in Example 2,
earlier than 10 days after the amount is no longer a frozen
except that Paul rolled over only $25,000 of the $40,000
deposit.
proceeds from the sale of the stock. The $15,000 proceeds
Page 26
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