A.G. Kalman <agk202[at]netscape.net> wrote:

- quote -

I concur with your analysis on this issue.

MTW

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Ed wrote:
- quote -

After reading your response, I realized that IRAs don't
require QDROs to avoid tax consequences to a spouse. An IRA
trustee can transfer an amount tax-free to the spouse's IRA
as part of a divorce agreement. This triggered the active
part of my brain such that I remembered that Internal
Revenue Code Section 408(g), provides that the provisions
governing IRA requirements and the taxability of IRA
distributions, "shall be applied without regard to any
community property laws." This precludes characterization
of your wife as a 50 percent "distributee" of the IRA. In
other words, as part of the divorce, there could have been a
division of the IRA into two parts by the trustee. Then,
the only income attributable to any of the two spouses would
be whatever they withdrew from their own IRA. However, in
this instance, you withdrew the funds from your IRA before
any division of the IRA balance. If you file
married-separate you must report all the taxable income and
get you would credit for all the withholding. If you file a
joint return, then the taxable income and withholding
obviously is shared.

If within the requisite time period of 60 days you deposit
the funds or some of the funds back into an IRA, the amounts
deposited would be a rollover and the taxable portion of the
distribution would be reduced accordingly on either your
separate return or the joint return.

--
Alan
http://taxtopics.net


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"A.G. Kalman" <agk202[at]netscape.net> wrote:
- quote -

Hopefully this information may help you. We were separated
for the two years prior. By agreement we sold the IRA to
pay for attorneys fees. There was no QDRO because the IRA
value was zero at the time of property division (there was
no value to divide).

What seems to be most interesting is that for every dollar I
rollover she receives half the tax benefit. Doesn't seem
right but I guess since it is a community property state
that is the way it works.

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Ed wrote:

- quote -

wasn't enough information provided.

What's missing is the information on how the court divided
the marital/community property. A spouse has a community
interest in the other spouse's IRA. When the marital
property is split, the IRA may stay with the owner and the
other spouse may get to keep the family Rolls Royce. If the
IRA is to be split, a court normally issues a QDRO in order
to divide the assets without creating tax consequences to
the other spouse. In addition, we don't know how long ago
you separated and broke the community income bond. We don't
know what any of the separation papers said about any of
your assets. I've seen agreements that precluded any spouse
from selling community property before the divorce was final
unless both spouses agreed.

All that having been said, when you withdrew the IRA funds
you created a taxable event in 2003 for either yourself or
for both of you depending upon whether a court order existed
or whether community income still existed. How it gets
reported (assuming no rollover within 60 days) depends upon
the above. Absent a QDRO, only you can roll over the funds
within 60 days to avoid taxation as you are the owner. This
is true even if your spouse is entitled to half the proceeds
as community income.

--
Alan
http://taxtopics.net

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Ed wrote:

- quote -

Since it was you IRA, you may rollover all of it within the
60 days.

- quote -

provided you don't roll it over within 60 days, you report
the entire amount on your tax return, at least in my state.
If community property state, I'm not so sure. Somebody
will answer this, I'm sure.


- quote -

Just be sure to report the gross amount and then only the
taxable amount on the "b" line, provided you roll over some
or all of it.

- quote -

Yes.

Cheer$,
Harlan Lunsford, EA n LA
(and LA is NOT in a community property state.)

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"Ed" <Hawthorne13906[at]yahoo.com> wrote

- quote -

All of it, if you want to fully avoid taxes, and the 10%
penalty tax for early distribution.

- quote -

I believe that would be community property state laws, yes.

- quote -

Yes, because of the 1/2 that you don't roll over, 1/2 of
that will be taxable to you.

- quote -

I believe so. You can't go from MFJ to MFS after the return
due date.

--
Paul A. Thomas, CPA
taxman at negia.net

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I have a very interesting issue here.

My ex-wife and I were divorced (final divorce decree) on
January 3, 2004. I had an IRA in my name (but community
property since from TX) that I took a distribution from on
Dec 15, 2003 that left it with a zero balance. Estimated
taxes and penalties were paid on the IRA when the
distribution was taken. Also, my ex-wife and I will file
married filing separately for 2003. The divorce decree only
states that the IRS tax code will be followed.

I am thinking about funding the IRA before the 60 day
rollover period is over. I have several tax related
questions before I do this.

1. How much of the IRA can I rollover (all of it, or just
half)? The IRA was in my name only.

2. I believe when filing separate that I show 1/2 of the IRA
income distribution and also get credit for 1/2 of the
estimated tax payments is this correct?

3. Are there any tax advantages for my 2003 return for
rolling over more than 1/2 of it?

4. Is it possible to do an amended married filing jointly
once I have filed separate?

I know this is a very tricky issue. Thanks in advance,

Ed

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