!2-Month SEPPs | Ed Slott and Company, LLC

!2-Month SEPPs

Private Letter Ruling (PLR) 9049044 allowed an individual to calculate distributions based on the number of months remaining in the first year. Distributions in subsequent years would be based on a 12-month period. PLR 9021058 similarly allowed an IRA owner to base distributions on a 12-month period other than a calendar year. Thus, taking monthly distributions from June of 2008 through May of 2013 would satisfy the five-year requirement explained in IRS Revenue Ruling 2002-62, which modified IRS Notice 89-25. Iguess I did not realize that someone could base payments over a 12-month period and not a calendar year period. Is this commonally used?

Al, I think some of the fiscal vrs CY issues are open to debate because 2002-62 modified some of the prior PLRs. In Ed's year end 2006 newsletter, he concluded that a fiscal year plan is permissible for the amortization or annuitization methods, but not the RMD method. It is generally accepted that the first CY distribution can either be the full annual amount of pro rated based on the first month of receipt to year end. The final stub year has received very little attention from the IRS unless there is a clear violation of the 5 year modification period when that determines the modification date rather than age 59.5. The modification date is 5 years from the date of the first SEPP distribution, so a June xx 2008 initial distribution for someone over 54.4 could not be modified until June xx, 2013. If the 2008 payment is 12 months, then the IRS is probably not going to care if anything is distributed in 2013 because 5 full distributions will have been taken over the period of the SEPP. All that said, I have no idea if this addresses the intent of your question.

I had been advising to do only calendar year; I think I'll continue based on your response. Contrary to some of the candidates, I don't like to flip-flop!
 

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