Category: Compensation & Employee Benefits; Individuals Copyright 1998, The Tax Resource Group. All rights reserved. Telephone 800-578-3498. Internet: www.taxresourcegroup.com TP has a balance in a defined benefit plan of about $600,000 which he plans to partially withdraw in an amount sufficient to net $250,000 after taxes. TP had attained the age of 50 on January 1, 1986. The issue is whether TP is eligible for the 1986 Tax Act special transition rule which allows ten-year forward averaging. TP is clearly not eligible for the 1986 Tax Act transition rule because the rule is available only to lump-sum distributions. A lump-sum distribution requires, among other things, that the taxpayer withdraw within one taxable year the entire balance to his credit. Sections 1122(h)(3) and 1122(h)(5) of the 1986 Tax Reform Act as well as the supporting Committee reports as well as the Joint Committee on Taxation's Explanation of the 1986 Act make it abundantly clear that the forward averaging provisions, both the five-year provision and the old ten-year provisions, apply only to lump-sum distributions. |
