- quote -

See the list of Prohibited Transactions on Page 43, 2004 IRS
Pub 590.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

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Jim-Poncin wrote:

- quote -

Jim, you're going to need a professional for this: One
possible way to go is to pay off the mortgage then put the
house in a trust fund which you then put back into the IRA
account! It has to be done in a timely fashion, but it would
leave no tax consequences.

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"Jim-Poncin" <jphkjkhkj[at]jkjhjkhkj.net> writes:

- quote -

First, it's *not* being used to pay for a home. The home
was paid for years ago. It's being used to pay off a loan.
So no, no tax break for the use of the funds.

Second, even if you were actually buying a home with the
funds, the tax break is only that the early withdrawal
penalty is waived (which doesn't apply to you anyways
because of your age) and then only on the first $10,000
withdrawn. The full income tax continues to apply.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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jphkjkhkj[at]jkjhjkhkj.net (Jim-Poncin) posted:

- quote -

No, you can't avoid taxes. (That's the pitfall.)

- quote -

Since traditional IRA's are established with income that
would have normally been taxed, but has been deducted from
your AGI for each year you contributed, the deal is that you
must pay _ordinary income tax rates_ on these funds, when
you eventually withdraw them.

Since they have presumably grown without any taxes over the
years, it is now time to pay the piper.

Sorry, but all distributions must be reported on the
appropriate IRA line and are subject to ordinary taxes.

Here's an unsolicited tip: You can start your withdrawals
now that you're over 59 1/2, and meter them out to carefully
avoid the extreme higher brackets for taxes. This could be
a very timely strategy, if political change causes rates to
escalate in the future (always possible).

For example, if your current income is quite low, you might
be able to take substantial distributions at rates of 25% or
less. When you later begin to draw Social Security and,
eventually, you start Required Minimum Distributions (RMD),
you may find you get a _double-kick-in-the-pants_, because
the RMD will cause 85% of your SS to be taxed, rather than
50%. Or, at lower income levels, you might be flying below
the clouds without owing tax on any SS (less than $32K,
including 1/2 of SS) ... and the RMD will cause part of your
SS to become taxable.

Hope this is helpful.

Bill

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Jim-Poncin wrote:

- quote -

Immaterial, all withdrawals from a traditional, deductible
IRA are taxable as ordinary income in the year withdrawn.
Since you are over 59-1/2, there is no early withdrawal
penalty.

- quote -

Isn't going to happen.

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Jim-Poncin wrote:

- quote -

No.

- quote -

By being past age 59.5, you've already avoided the nasty 10%
excise tax.

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"Jim-Poncin" <jphkjkhkj[at]jkjhjkhkj.net> wrote:

- quote -

Eliminate the tax consequence? Don't take the distribution.
Otherwise it's taxable.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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I'm thinking about paying off the mortgage on my home with
some IRA money. It's a standard traditional IRA acct., and
I'm past 59 1/2 yrs of age. I haven't previously tapped
these funds for any purpose.

Are there any ways of avoiding taxes since it's being used
to pay for a home? (I already own the house and this is just
to finish off the mortgage). Are there any particular
pitfalls to avoid?

I want to eliminate or minimize the tax consequences.

Thanks, Jim

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