Alan wrote:
- quote -


Question:
Thanks very much for your response concerning IRA distribution.
What prompted my question was a situation where there
is no taxable portion to the IRA distribution (basis in IRA
exceeded total distribution). It seems that, in that situation,
there is no taxable portion, and, by extension, no penalty. But
maybe I am missing something here?

Answer:
If you complete Part I of Form 8606, you will see that no part of
the distribution is taxable. 10% times zero equals zero.

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

Phil Marti wrote:
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Phil is correct. Just to explain it to you: Every distribution
from an IRA with a cost basis requires you to use Form 8606 to
compute how much of the distribution is a return of your cost
basis and how much is taxable. Therefore, the total distribution
must have a component that is taxable. After the taxpayer closes
all IRA accounts and discovers that there was some basis that was
never returned... that amount is a loss that can be deducted on
Schedule A as a misc. itemized deduction.
- quote -

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

<bm30003700[at]aol.com> wrote:

- quote -

No exception. The penalty applies to the taxable portion of the
distribution.

- quote -

15b is different for 2008. The 2007 15b is the 2008 15c. There is no
reference on the 2007 form to line 15c.

--
Phil Marti
Clarksburg, MD

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

My client has a loss on an IRA due to total distribution of less than
the IRA's basis. Is there no 10% penalty in this situation (my client
is under 59 1/2, and doesn't otherwise meet any exceptions to the
penalty)?

Also, 2007 Form 8606, has a note below line 15 referring to potential
pental on amount on "line 15c"
Where is line 15c? I see it on Form 8606 for 2008, but not the 2007
Form.

Thanks

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >