"MTW" <mtwingcpa[at]yahoo.com> wrote:
- quote -

Yes, yes - correct you are! I spoke too quickly, which my
wife will tell you I do all the time.

Gene E. Utterback, EA

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A.G. Kalman wrote:

- quote -

....and the cite for that is IRC 408(d)(6).

MTW

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Why not have your attorney file a motion to modify the
settlement agreement in the divorce to add the QDRO
language? I've done this before and it worked out fine.

If the decree's not too old, I see no reason why that won't
fix the problem, unless your outside the 60 days to roll the
money back into the plan or your ex- is uncooperative about
returning funds she may already have.

Bruce Atty/CPA

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Gene E. Utterback, EA wrote:
- quote -

There is no such thing as a QDRO for an IRA. QDROs relate
to retirement plans. All that is required for an IRA split,
is for the court order to identify how the IRA is to be
split. Each IRA trustee can tell the owner how they would
like the court order worded.

--
Alan
http://taxtopics.net

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twc wrote:

- quote -

No, and no. Furthermore, what "untaxed funds?" By making
the withdrawl, there is now a liability for tax as you
stated, so how can it be "untaxed?"

- quote -

What he should have done is have the IRA custodian split the
account into two accounts according to the divorce property
settlement (whatever ratio it states) and have the wife
withdraw from her separate post-split account. That way,
she will recognize the income; not the husband.

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twc wrote:

- quote -

Shoulda done a QDRO (or the IRA equivalent thereof).
Taxable to the husband, complete with 10% penalty if under
59 1/2, not deductible as alimony (since it was property
settlement), not taxable to wife.

- quote -

Is the divorce not going to be final by December 31st? If
it is final by then, they can't file as married (either MFJ
or MFS), because they aren't married. If they are still
married, it's still the husband's income. Wife may feel a
moral obligation to pay some of the tax, but unless the
divorce decree requires it, she has no legal obligation.

Phoebe

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twc wrote:

- quote -

Husband pays tax on HIS distributions from the IRA. He may
deduct amounts paid to wife if alimony.

- quote -

"Should" is not a word found in tax law, at least I don't
ever remember seeeing it anywhere. What husband and wife
agree to is their own concern. Or a judge's! (grin

Cheer$,
Harlan Lunsford, EA n LA

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"twc" <bfry[at]mindspring.com> wrote:

- quote -

A QDRO - Qualified Domestic Relations Order - should have
been incorporated into the divorce decree. Had that
happened, the IRA would have been split at the brokerage
house with the husband and wife now having separate
accounts.

The way you describe it, the husband is on the hook for the
taxes - HE took the money out, HE pays the tax. The
property settlement between the spouses is NOT a taxable
event. I'm afraid he is hosed.

Why didn't your divorce attorney bring in an accountant to
go over this? Have you considered suing the attorney for
malpractice?

Gene E. Utterback, EA

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twc" <bfry[at]mindspring.com> wrote:

- quote -

Only if the payment by husband to wife qualifies as alimony.

- quote -

The husband, if it's his IRA and his withdrawal.

- quote -

Not unless it's a community property state, in which case
the IRA could be community property.

*Dan Evans
*Author of the Tax Protester FAQ
*http://evans-legal.com/dan/tpfaq.html

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twc wrote:

- quote -

If the husband takes a withdrawal from his IRA it is taxable
to him and would also be subject to the early withdrawal
penalty if he is under age 59 1/2. The subsequent payment to
the wife as part of a divorce settlement is not taxable to
the wife nor deductible by the husband.

The best way to handle this is to have the IRA trustee just
divide the IRA into two parts as part of the divorce
settlement. This would be a nontaxable event to both
parties. The trustee would require a properly executed
court approved divorce decree or legal separation agreement
to perform the IRA split. The trustee should be able to tell
you how they would want the court approved document worded.

--
Alan
http://taxtopics.net

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"twc" <bfry[at]mindspring.com> writes:

- quote -

So is husband one of those people who never heard "measure
twice, cut once," or does his divorce lawyer have tofu for
brains? This was really a bonehead move.

- quote -

Not unless it can be considered to be alimony. The fact
that he was dumb enough to withdraw retirement funds rather
than have them transfered incident to the divorce doesn't
create taxable income for her.

- quote -

When pigs fly, unless it's alimony

- quote -

It's his income, so it goes on his MFS return.

- quote -

If they're getting along well enough to have this discussion
and the divorce isn't final, why not file a mutually
beneficial joint return?

Phil Marti
Topeka, KS

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- quote -

It's a little late, twc, if you have already taken the
distributions and more than 60 days have gone by. If that
is the case, it is you who are saddled with the tax and,
likely, penalty for having taken early distributions. If
you have not taken distributions, or part of a 60 day
period for rolling the distributions back into another IRA,
you may use the following guidance:

If an interest in a traditional IRA is transferred from your
spouse or former spouse to you by a divorce or separate
maintenance decree or a written document related to such a
decree, the interest in the IRA, starting from the date of
the transfer, is treated as your IRA. The transfer is tax
free.

Transfer methods. There are two commonly-used methods of
transferring IRA assets to a spouse or former spouse. The
methods are: Changing the name on the IRA, and

Making a direct transfer of IRA assets.

If all the assets are to be transferred, you can make the
transfer by changing the name on the IRA from your name to
the name of your spouse or former spouse.

Direct transfer. Under this method, you direct the trustee
of the traditional IRA to transfer the affected assets
directly to the trustee of a new or existing traditional IRA
set up in the name of your spouse or former spouse.

If your spouse or former spouse is allowed to keep his or
her portion of the IRA assets in your existing IRA, you can
direct the trustee to transfer the assets you are permitted
to keep directly to a new or existing traditional IRA set up
in your name. The name on the IRA containing your spouse's
or former spouse's portion of the assets would then be
changed to show his or her ownership.

If the transfer results in a change in the basis of the
traditional IRA of either spouse, both spouses must file
Form 8606 and follow the directions in the instructions for
that form.

You can convert amounts from a traditional IRA into a Roth
IRA if, for the tax year you make the withdrawal from the
traditional IRA, both of the following requirements are met.

Your modified AGI for Roth IRA purposes is not more than
$100,000.

You are not a married individual filing a separate return.

Note.
If you did not live with your spouse at any time during the
year and you file a separate return, your filing status, for
this purpose, is single.

If you have assets in retirement plans, which are part of a
divorce settlement, the following applies:

A QDRO is a judgment, decree, or order relating to payment
of child support, alimony, or marital property rights to a
spouse, former spouse, child, or other dependent. The QDRO
must contain certain specific information, such as the name
and last known mailing address of the participant and each
alternate payee, and the amount or percentage of the
participant's benefits to be paid to each alternate payee. A
QDRO may not award an amount or form of benefit that is not
available under the plan.

A spouse or former spouse who receives part of the benefits
from a retirement plan under a QDRO reports the payments
received as if he or she were a plan participant. The spouse
or former spouse is allocated a share of the participant's
cost (investment in the contract) equal to the cost times a
fraction. The numerator (top part) of the fraction is the
present value of the benefits payable to the spouse or
former spouse. The denominator (bottom part) is the present
value of all benefits payable to the participant.

A distribution that is paid to a child or other dependent
under a QDRO is taxed to the plan participant.

"Jack" - John H. Fisher - TaxService[at]aol.com
Philadelphia, Pa - Atlantic City, NJ - West Wildwood, NJ
My Newsgroups & Boards at: http://members.aol.com/TaxService/index.html

Where Ignorance is bliss, 'tis folly to be wise!=

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Husband withdraws various IRA funds, denominated in his
name, thus incurring taxable income liability. A portion of
those as yet untaxed funds is paid to wife on divorce
settlement. Is wife required to declare untaxed funds
received as taxable income? Does husband deduct that amount
from his own taxable income?

Who should pay the tax in this situation where married, but
filing separately. Should husband/wife simply split the tax
for portions of the untaxed funds each received? Thanks.

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