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Prohibited transaction

Rollover requirement waived for taxpayer who relied on spouse’s financial acumen

Rollover requirement waived for taxpayer who relied on spouse’s financial acumen

PLR 201612017 In a private letter ruling (PLR), IRS has waived the 60-day IRA rollover requirement for a spouse who erroneously relied on her spouse’s financial know-how. However, the other spouse wasn’t as lucky. His untimely IRA rollover got no relief because he couldn’t show that he intended to make a valid rollover. He deposited […]

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Tax Court – IRA owner’s guarantee of loan to IRA-owned corporation resulted in deemed distribution

Tax Court – IRA owner’s guarantee of loan to IRA-owned corporation resulted in deemed distribution

Thiessen, (2016) 146 TC No. 7 The Tax Court has held that a taxpayer’s personal guarantees of loans made to a corporation that he formed and that was owned by his individual retirement account (IRA) were prohibited under Code Sec. 4975 and resulted in a deemed distribution of all of the IRA assets. It also […]

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Tax Court – failure to report court-ordered IRA liquidation results in accuracy-related penalty

Tax Court – failure to report court-ordered IRA liquidation results in accuracy-related penalty

Navaid, TC Memo 2016-37 The Tax Court has ruled that a taxpayer who failed to report the court-ordered liquidation of his bank-held IRA for restitution payments was liable for the accuracy-related penalty for substantial understatements of income tax. Although the taxpayer was never notified of the court’s action and never received a Form 1099-R, the […]

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Tax Court – Taxpayer’s direction to IRA custodian to purchase stock didn’t result in taxable distribution

Tax Court – Taxpayer’s direction to IRA custodian to purchase stock didn’t result in taxable distribution

McGaugh, TC Memo 2016-28 The Tax Court has ruled that there wasn’t a taxable distribution to the owner of a self-directed IRA who directed the IRA custodian to wire cash to purchase shares of a private company, where certificates for those shares were apparently delivered after the 60-day rollover period in Code Sec. 408(d)(3). The […]

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Tax Court – attempt to use C corp to avoid Roth IRA contribution limits doesn’t work

Tax Court – attempt to use C corp to avoid Roth IRA contribution limits doesn’t work

Polowniak, TC Memo 2016-31 The Tax Court has held that a individual’s attempt to circumvent the Roth IRA contribution limits, by funneling payments through a C corporation in which his Roth IRA held a 98% interest, resulted in a Code Sec. 4973 excise tax on excess contributions. The fee-for-services agreement used, and the payments funneled […]

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Tax Court – Taxpayer had claim of right in payment by SEP-IRA, so it was taxable to him

Tax Court – Taxpayer had claim of right in payment by SEP-IRA, so it was taxable to him

Vandenbosch, TC Memo 2016-29TC Memo 2016-29 The Tax Court has held that a multi-step transaction, that was intended to result in taxpayer’s SEP-IRA making a loan to a third party, instead resulted in the taxpayer having a claim of right in the money paid out of the SEP-IRA. Thus, that money ended up being taxable […]

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Surviving spouse/sole trustee of decedent’s trust granted rollover relief for IRA despite regs

Surviving spouse/sole trustee of decedent’s trust granted rollover relief for IRA despite regs

PLR 201606032 In a Private Letter Ruling (PLR), IRS has ruled that it would waive the 60-day rollover requirement for a taxpayer whose failure to timely roll over funds from her husband’s individual retirement arrangement (IRA) to her IRA was due to her emotional distress following the death of her husband and the stress of […]

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Rollover relief granted to taxpayer who suffered emotional distress following spouse’s death

Rollover relief granted to taxpayer who suffered emotional distress following spouse’s death

PLR 201606032 In a Private Letter Ruling (PLR), IRS has ruled that it would waive the 60-day rollover requirement for a taxpayer whose failure to timely roll over funds from her husband’s individual retirement arrangement (IRA) to her IRA was due to her emotional distress following the death of her husband and the stress of […]

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No rollover relief for taxpayer who tried to use IRA distribution to buy partnership interest

No rollover relief for taxpayer who tried to use IRA distribution to buy partnership interest

PLR 201547010 In a private letter ruling, IRS has refused to waive the 60-day rollover requirement for a taxpayer whose attempt to use an IRA distribution to buy an interest in a partnership failed because the IRA custodian couldn’t hold the interest—a mistake that the taxpayer did not learn of for almost a year. Although […]

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Top Year-End IRA Reminders from IRS

Top Year-End IRA Reminders from IRS

Individual Retirement Accounts, or IRAs, are important vehicles for you to save for retirement. If you have an IRA or plan to start one soon, there are a few key year-end rules that you should know. Here are the top year-end IRA reminders from the IRS: Know the contribution and deduction limits.  You can contributeup to […]

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Tax Court – Retirement plan participant couldn’t carry forward disallowed IRA contribution deduction

Tax Court – Retirement plan participant couldn’t carry forward disallowed IRA contribution deduction

Dunn, TC Memo 2015-208 The Tax Court has rejected various arguments made by a taxpayer to carry forward an IRA contribution deduction that was disallowed because, in the year for which the contribution was made, he was an active participant in a retirement plan and had high earnings.   Click here for the Opinion of the […]

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10% penalty applied to 401(k) distribution used to prevent employee’s eviction from home

10% penalty applied to 401(k) distribution used to prevent employee’s eviction from home

Kott, TC Summary Opinion 2015-42 The Tax Court has held that a taxpayer who was younger than age 59-1/2 was liable for the 10% early distribution penalty when he withdrew funds from a Code Sec. 401(k) plan because he was delinquent in his mortgage payments and wanted to avoid foreclosure. Background. Code Sec. 72(t) imposes an […]

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Court of Appeals, Eighth Circuit holds payment of wages to taxpayer by his IRA-owned LLC was prohibited transaction

Court of Appeals, Eighth Circuit holds payment of wages to taxpayer by his IRA-owned LLC was prohibited transaction

Ellis, et ux. v. Comm., (CA 6/5/2015) 115 AFTR 2d ¶ 2015-805 The Court of Appeals for the Eighth Circuit, affirming the Tax Court, has concluded that where an individual taxpayer had his IRA own the shares of his business, a limited liability company (LLC), the LLC’s payment of compensation to the taxpayer for his […]

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Extra Payments Due to Financial Institution Error Won’t Trigger IRA Modification Penalty

Extra Payments Due to Financial Institution Error Won’t Trigger IRA Modification Penalty

PLR 201510060 IRS has privately ruled that two additional payments received in one tax year won’t result in a modification to a series of substantially equal periodic payments being made under Code Sec. 72(t), and won’t subject the recipient to the 10% additional tax on early distributions from IRAs. The additional payments were the result […]

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Payments From Qualified Pension Plans — What Are The Choices?

Payments From Qualified Pension Plans — What Are The Choices?

Regardless of their age, employees who are fortunate enough to be covered by a noncontributory qualified defined benefit (usually pension) plan would be well advised to check and see how and when they or their spouses or other beneficiaries will be entitled to a benefit. Here’s an overview of the essential rules. When payments may […]

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IRS Didn’t Bear Burden Of Production On Code Sec. 72(T) Additional Tax

IRS Didn’t Bear Burden Of Production On Code Sec. 72(T) Additional Tax

Ralim S. El (2014) 144 TC No. 9 The Tax Court has determined that a taxpayer received and failed to report a deemed taxable distribution from his retirement account. As a result, the taxpayer was liable for the Code Sec. 72(t) additional tax on this deemed taxable distribution as well as various penalties. The Tax […]

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IRS Forbids Using Your IRA to Give to a Donor-Advised Fund

IRS Forbids Using Your IRA to Give to a Donor-Advised Fund

IRS Forbids Using Your IRA to Give to a Donor-Advised Fund – Not All Charities Are Created Equal When It Comes to Retirement Accounts, as reported in the WS Journal. Q:  Does the IRS consider IRA transfers to Vanguard Charitable a “qualified charitable” event and thus a tax-free transfer? R.H. Liberty Lake, Wash. A: No. […]

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Tax Court: IRA withdrawal to cover deposit to govt. annuity not tax-free rollover

Tax Court: IRA withdrawal to cover deposit to govt. annuity not tax-free rollover

Bohner, (2014) 143 TC No. 111 A fractured Tax Court has held that a taxpayer was required to include in income amounts that he withdrew from his traditional individual retirement account (IRA) in order to cover a deposit to the Civil Service Retirement System (CSRS) to increase his retirement annuity. The majority reasoned that rollover […]

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New Q&As Explain Single Distribution Rule For Retirement Plans

New Q&As Explain Single Distribution Rule For Retirement Plans

IRS has explained two important aspects of the new rule providing that when a taxpayer makes a retirement plan rollover to multiple qualified destinations, the amounts are treated as a single distribution for allocating pre- and after-tax contributions. The first is that a taxpayer can’t take a partial distribution of only after-tax amounts in a […]

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Taxpayer Given Extension To Recharacterize Erroneous IRA-To-Simple-IRA Rollover

Taxpayer Given Extension To Recharacterize Erroneous IRA-To-Simple-IRA Rollover

PLR 201446036 IRS has granted a taxpayer an extension of time under Reg. § 301.9100-1 and Reg. § 301.9100-3 to make an election to recharacterize (i.e., undo) an erroneous 2008 IRA-to-Simple-IRA rollover as a contribution to an IRA. The taxpayer got the extension because she relied on her advisor when she made the forbidden rollover. […]

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Meet Paul Raymond

Meet Paul Raymond

Mr. Raymond is a sought after speaker in tax controversy law by many attorney, accountant, and business groups and at the request of the Internal Revenue Service, has presented programs at the IRS Nationwide Tax Forum, attended by tax professionals throughout the United States.

Additionally, he continues to be an active member in the Section of Taxation, American Bar Association, where he was the Past Chair of the Employment Taxes Committee.

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Member CA Bar Member Orange County Bar US Tax Court Attorney