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The holiday season ushers in a time for family, friends and financial security. It is also a time to make some year-end IRA tax moves detailed in December's issue of Ed Slott's IRA Advisor Newsletter.

  • 2009 Roth Conversions: To qualify for a 2009 Roth Conversion, the funds must be distributed from the IRA or plan in 2009.

  • IRA Transfers to Charity: Qualified Charitable Distributions (QCDs) must be completed by year-end. This provision is set to expire after 2009, unless it is extended through 2010 by pending legislation.

  • Estimated Taxes: If clients are short on their estimated tax payments, federal tax withholding can be taken from an IRA withdrawal at year-end.




Inside IRA

Guest IRA Expert

Seymour Goldberg, CPA, MBA, JD

DOL Rules Trustee of an IRA Trust Can Receive Trustee Fees

  • The Related Parties
  • DOL Rules There is No Prohibited Transaction
  • Warning
  • The Official Opinion
  • Unanswered Questions
  • Advisor Action Plan

DOL Rules That Broker's IRA Agreement Creates a Prohibited Transaction

Year-End IRA Tax Moves

2009 Index of Articles

2009 IRA Experts


If you are not already an Ed Slott IRA Advisor Newsletter subscriber, you can preview past issues before subscribing.


The American Jobs Creation Act of 2004 signed into law back on October 22, 2004 imposes a fine for suspected tax shelters.

This little known provision of the Act provides penalties for not reporting "listed transactions." The penalty is steep at $100,000 for individuals and $200,000 for all others, including corporations. The penalty for listed transactions cannot be waived or rescinded.

A listed transaction is a transaction that is the same as or substantially similar to one of the types of transactions that the IRS has determined to be a tax avoidance transaction. These transactions are identified by IRS notice, regulation, or other form of published guidance as a listed transaction.

The IRS maintains a list of their listed transactions. A taxpayer with such a transaction, or something "substantially similar", must report it at tax time, generally April 15th. If not, the tax law makes the fines almost automatic. It doesn't matter how much money was sheltered or whether the taxpayer knew about the IRS list.

For updates to the list, go to the IRS web site at and click on "Abusive Tax Shelters and Transactions".

IRS Form 8886, Reportable Transactions Disclosure Statement, is where reportable transactions are disclosed. It is referred to as the most expensive tax form because of the severe penalties. The instructions for Form 8886 detail listed transactions.


The IRA owner has named a trust as the beneficiary of the IRA. The IRA owner has died and the executor, advisor, IRA custodian has been advised that the IRA needs to be retitled "in the name of the trust."

There is a right way and a wrong way to retitle the IRA in the name of the trust. If you do it the wrong way, you will have a taxable distribution to the trust and there will be no more IRA. If you do it the right way and the trust is a qualifying trust, then the trust can stretch distributions from the IRA over the age of the oldest trust beneficiary.

To correctly retitle the IRA, the name of the decedent must remain in the title of the IRA. For example: John Smith, deceased, IRA fbo the John Smith Trust. (fbo means "for benefit of")

An IRA that is titled in the name of the trust only (or in the name of any non-spouse beneficiary only) is considered distributed in full to the trust and is taxable in the year of the distribution. Be very careful when retitling an IRA at the death of the account owner.

Private Letter Ruling 200946063:

Two 76-year-old taxpayers, we will call them "Joe" and "Fred", received distributions from their IRAs and assert that their failure to accomplish a rollover with the 60-day prescribed period was due to an error by the bank.

Both Joe and Fred went to the bank in September 2005 and met with a financial representative who mistakenly opened non-IRA CDs. An employee of the financial institution even signed an affidavit acknowledging the error that caused both distribution amounts to be deposited in non-IRA CDs

The Internal Revenue Service considers all relevant facts and cirumstances when deciding to grant a waiver of the 60-day rollover requirement, including: (1) errors committed by a financial institution; (2) inability to complete a rollover due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign country or postal error; (3)the use of the amount distribution; (4)the time elapsed since the distribution occurred.

The IRS waived the 60-day rollover requirement with respect to the distribution of the amount from the two IRAs.

This ruling brings up an important point that happens all too frequently. Account owners need to double check on their transfers and make sure the funds transferred find their way into the right kind of account (whether it be an IRA, Roth IRA or non-IRA).

Q: Is there any tax advantage of converting a "non-deductible" IRA to a Roth IRA vs. a traditional deductible IRA to a Roth IRA? I'm asking because the non-deductible has "original" cost basis which is tax-free, and it would seem to make sense to convert as much non-deductible IRA as possible, but only if the conversion implies no taxation. Please clarify.

A: You have a good idea to convert a non-deductible IRA to a Roth IRA. Unfortunately it does not work that way unless that is the only IRA you have and all the money in that IRA is non-deductible.

There is a little-known rule called the "pro-rata rule", which states that when an IRA contains both non-deductible and deductible funds, each dollar withdrawn or converted from the IRA will contain a percentage of tax-free and taxable funds. The same is true even if you have separate IRAs with non-deductible and deductible contributions. All IRAs must be considered as one IRA for the pro-rata rule.

For more questions and answers, CLICK HERE to visit The Slott Report, which is updated Monday-Friday with the latest technical expertise and company information.

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