Discussion:0% PENALTY ON EARLY DIST EXCEPTIONS-FORM 5329
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Discussion Forum Index --> Tax Questions --> 0% PENALTY ON EARLY DIST EXCEPTIONS-FORM 5329
Vermontcpa (talk|edits) said: | 9 February 2008 |
| I am looking for an exception for client on 10% penalty on early IRA distribution for 2007 1099R. She had cancer in 2006 and did not work at all in 2007. I am able to exception away the 10% on medical deductions exceeding 7.5% of AGI but thats not enough. Does this case meet the 03 exception of due to total and permanent disability? I am thinking no.. but would like to hear from others or any other exceptions that could fit this case.
Thanks | |
| 9 February 2008 | |
| Here's the definition you need to use for §72
§72(m)(7) Meaning of disabled. For purposes of this section , an individual shall be considered to be disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration. An individual shall not be considered to be disabled unless he furnishes proof of the existence thereof in such form and manner as the Secretary may require. Does the client satisfy the definition?????????? | |
| 14 March 2009 | |
| I agree with NYEA - it would be exception number 3 on form 5329, which for 2008 is shown on line 2. It can be a fairly heavy burden to prove the Code 72 definition of "disabled" unless it's an obvious disablity (e.g., loss of use of two limbs, etc.) "Cancer which is inoperable and progressive" is ordinarily considered as preventing substantial gainful activity ( Regs. 1.72-17A(f)(2)(iv).) However, whatever the impairment it must in fact "prevent the individual from engaging in his customary or any comparable substantial activity" (Regs. 1.72-17A(f)(2)last paragraph.) So the impairment by itself may not suffice to satisfy the IRS in the event of an audit. In any case, I suggest that you have a medical doctor's statement backup ready along with a narrative explanation. And that leads me to my own question, which I will post separately under another Form 5329 subject heading: Would a narrative explanation and medical documentation ATTACHED to form 5329 be helpful to perhaps avoid an audit? | |
