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I hear you. If you are in the 10-12% bracket and you think you will be in the 28% bracket in a couple years, it makes sense. I don't see it happening for my retired clients either. Tom Longview, TX

The Tables are near the back: https://www.irs.gov/publications/p590b

If you are going to research this, the name is "Gillmore" and you may get more hits with the proper spelling. I have no personal experience with this, but found these interesting, for whatever they are worth: https://law.justia.com/cases/california/supreme-court/3d/29/418.html https://www.willicklawgroup.com/wp-content/uploads/2012/04/Gillmore-Gillmore-and-Trustee-Pay-over-Orders.pdf The second one is an older blog by an attorney that references the Dunkin case and that lays out different clauses that could have been employed but that Dunkin did not use that possibly could minimize tax impact, differences in tax brackets between the parties, and specific "tax intent" language. From reading all of this, it seems to me that you should look at the actual document that your client agreed to. I could be very wrong on this thought also, but it seems to me that this type of arrangement may fall under IRC sec 1041 that deals with transfers of property incident to divorce, and because the heart of the Gillmore decision is that one spouse can't take actions to deprive the other party to division of assets to which that other party is entitled to (by refusing to retire). That's a long-winded way of saying I don't know. Sorry & good luck! Maybe someone else has experience that will clarify, and hope you will post what you find out.

Your client's situation matches the Dunkin case so close that I would say no. In reversing the tax court decision, the 9th Circuit determined that Dunkin was basically using money from his wages to pay off a debt owed to his ex. And it appears her analysis drives the nail in the coffin for the OP's client. Looks to me like it depends on facts and circumstances; and in your clients case it looks like he is on the hook for taxes. Did he consult an experienced attorney before he made the agreement?

Client should check the contract for its surrender period. Typically the penalty lessens as the date gets closer to the end of that period. ETA: no tax consequence if the reinvested funds stay within the IRA.

Thank you for the information. I used the spelling of the election that the attorney letter provided. Go figure that the attorney had the spelling incorrect!!

This is what I've found too. When it comes to RMDs or inherited accounts, it seems they run Roth with the traditional IRAs. And it's sometimes confusing to distinguish if what they're saying is the same for both or different for each type of account.

As a practical matter, I file the delinquent returns as they would have been had they been filed within the statute, knowing that the credits should be disallowed. However, I have found that the IRS processes and only denies the refundable portion in most cases. It has been a while so don't rely on this.... Tom Longview, TX

I would like to eliminate partnerships just because of some of the potential issues but I don't feel like I can drop existing clients who will get major sticker shock going to someone else for a 1065. I feel like I have to do 1041's because of the demographics of my clientele (I inherited about half my clients from a 90 year old preparer) and usually the estate returns are only for one year. I'm okay with complexity if the client didn't deliberately seek it out (some folks just love to complicate their lives). My biggest beef is with brokers who have clients invest (often trivial amounts) in limited partnerships with no regard to the tax preparation consequences. I know H&R Block loves a K-1 with an amount on nearly every line (generating about $1,000 worth of forms) but I don't.

Right on!!! I get at least one every year. They get a free dinner to go to a seminar and get talked into converting and never hear or understand the repercussions. It makes me so angry. On the other hand, I have the clients who call and ask how much they can withdraw without owing any tax. Those are the ones that heard what I said to them at some point. I never really have liked Roth IRAs and probably never will. Like you, my clientele is primarily middle America or lower. I only have a handful of fairly wealthy clients and they are trained to ask for advice before they make a move.

The taxpayer consulted an attorney, but I do not know how experienced the attorney is....I have asked that the taxpayer forward the actual Domestic Relations Order so I can read the details of the Order. I currently have two summary letters from the attorney. Thank you all for your input and information.

Agree, Refund Statute Expiration Date (RSED) is three years

Client does not want to keep his annuity that is held in his IRA. Wants to surrender and invest in something else. Since the surrender value will still be in the IRA, there is no tax or penalties, correct? Tom Longview, TX

surrender penalty is up to client to decide on. I just want to make sure it is tax & penalty free because it is in the IRA. Thanks for confirming my thought. Tom Longview, TX

If the taxpayer had retired, then the benefit payments to the ex-spouse would be paid from plan; however, being taxpayer has chosen to continue to work, he has to pay the ex-spouse the monthly Civil Service Retirement System benefits that is due her out of pocket. Seems unfair that taxpayer pays ex-spouse retirement benefits but not able to deduct the amount that he is required to pay by the courts. Hoping a tax professional is familiar with the Gilmore Election and how to handle the taxation of the result of electing the Gilmore Election. Thank you.

From Pub 504: "Benefits paid to a spouse or former spouse. Benefits paid under a QDRO to the plan participant's spouse or former spouse must generally be included in the spouse's or former spouse's income." Code Section 402(e)(1)(A) refers to payments from a plan assigned to an "alternative payee"--not sure this would cover someone paying the ex out of pocket. Would it have been possible for the plan to pay the ex and not your client?

That is incorrect. Exactly the opposite. I don't have the sites right now, but you must take RMDs for an inherited IRA unless you are a spouse or a special exception. Tom Longview, TX

They have an FAQ page here https://www.bls.gov/respondents/ars/faqs.htm found via search engine. Looks legit, I guess, but sheesh they want us to be suspicious of everything, then also send out-of-the-blue emails wanting people to click on links.